Despite rising mortgage rates and plunging applications for home loans, the housing recovery will continue, said Anthony Chan, chief economist at Chase Private Client.
“Prices, when you look at Case-Shiller … are still down about 23 percent from the peak in May of 2006,” Chan told “Nightly Business Report.”
“Given all the pent-up demand that’s certainly built up over the past couple years, housing still has a ways to go.”
According to the Mortgage Bankers Association, home loan applications hit a four-year low last week, sinking 13.5 percent. Meanwhile, 30-year mortgage rates rose 7 basis points to 4.80 percent. http://www.cnbc.com/id/101025316
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While home prices may be down from 2006, they are rising. The latest S&P/Case-Shiller composite index shows home prices in May were up 12.1 percent compared to a year earlier. Those higher prices, coupled with rising mortgage rates, have some concerned that the housing recovery could become derailed.
Chan, however, isn’t one of them.
“It’s unrealistic to expect that the trends in housing won’t slow down a little bit because mortgage rates are picking up, and some people, of course, will get priced out of the market,” he said.
However, he thinks we’ll see “a little bit of a slowdown, but not a collapse in housing market growth.”
Chan believes the 12 to 13 percent growth rate in home prices is unsustainable, and instead sees prices going up anywhere from 4 to 7 percent on a year-over-year basis over the next couple of years.
“That’s healthy because that will prevent another bubble from brewing any time soon.”
(Read More: Yep, It’s Another Housing Bubble)