For years, the housing market kept sinking as homeowners struggled under the burden of mortgage debt. Yet over the past year, home prices have finally started to rise. Now that housing appears to be on more even footing, though, a big jump in mortgage rates threatens to cut off the recovery before it can run its full course.
In the following video, Fool contributor Dan Caplinger takes a look at the impact that rising mortgage rates could have on home prices. Dan notes that until now, investors have been upbeat about the prospects for homebuilder stocks, with favorable signs of a recovery in demand and building activity pushing those stocks up substantially. Now, though, mortgage rates have risen more than a full percentage point in less than two months, and that could keep marginal mortgage borrowers from being able to get financing for home purchases. Dan concludes that the unanswered question is whether high levels of activity among all-cash buyers will keep prices on the rise, or whether less affordable monthly payments will have a larger impact on home demand and therefore long-term price trends.
Fool contributor Dan Caplinger owns warrants on Wells Fargo. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Citigroup and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.