New Doc 1

New Doc

According to two measures of how higher mortgage rates are affecting potential new home buyers, it seems to me builders shouldn't be too frightened.

Take a look at the two charts. The first shows that the recent run up in mortgage rates hasn't stopped traffic of potential new home buyers. In fact, the index that measures new home traffic has moved sharply upward (maybe because buyers want to buy before rates go even higher) and now stands at about the 30-year average.

And, as the second chart shows, the percentage of consumers who say they plan to buy a new home in the next six months also has moved up in spite of higher mortgage rates (maybe because buyers want to buy before rates AND housing prices go up even higher). Yes, at 1% the intention to buy is below the long-term average of 2%, but it's nonetheless double what it was 18 months ago.

So, while higher mortgage rates aren't a good thing and might scare some buyers away, at this point they're clearly not bringing the housing recovery to an unhappy ending.

P.S. Let's face it: rates are still very low, around 4.5%. Compare them to the 7% rates that prevailed in 2006, when, as you might recall, the housing market was booming.