In an effort to calm down nervous members of Congress, Federal Reserve Chairman Ben Bernanke promised last week to do regular check-ups of the housing market to make sure higher mortgage rates were not damaging the recovery.
This week, Dr. Bernanke will find the vital signs in home sales remain strong, economists said. But it will be months before the patient can be given a clean bill of health.
The rate on a 30-year fixed mortgage has risen above 4% this summer for the first time in a year. Rates slipped to 4.37% in the week ended July 18 from 4.51% in the prior week. They were 3.45% in April.
“It will take a while to know for sure if housing can handle the spike in rates. The numbers will be noisy for a month or so,” said Millan Mulraine, director of U.S. research and strategy at TD Securities.
Mortgage purchase applications rose 2% over the course of June, despite the higher mortgage rates, noted Michelle Meyer, economist at Bank of America Merrill Lynch.
Bernanke said that financial conditions would be a factor in the timing and pace of the reduction in the central bank’s $85 billion-a-month bond-buying program. Many analysts said the tapering could begin as early as September.
On Monday morning, the National Association of Realtors is likely to report that existing home sales rose 1.9% in June to a seasonally adjusted rate of 5.28 million, according to economists polled by MarketWatch.