Home building’s up, but mortgage costs could go up too
Housing starts were up sharply in October, a sign that builders are responding to strong demand and undersupply of homes across the country. The housing market is likely to continue strengthening in 2017 — with job and wage growth and consumer confidence improving. Rent-increases are also on a tear in many markets, driving people to buy if they can. On the other hand, long-term interest rates (on Treasury bills and mortgages) have risen lately — because of Janet Yellen’s signals that the Fed is closer to a decision to hike short-term rates in December, and because of rising expectations for economic growth and stock-market strength in 2017. Higher mortgage rates might have a dampening effect on home prices and home sales in the long run, as they add to the cost of a home purchase. But in the short-term, buyers are likely to ignore or adjust to marginally higher mortgage rates, and to be driven in their purchase decision by other economic factors — such as the strong job market, higher wages, and rising rents.
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