As the housing market gradually shows some moderation after a frenzied year for homebuying, housing analyst Ivy Zelman of Zelman & Associates predicts that a rise in mortgage rates will slow an overwhelming demand for new homes, according to Bill McBride in his CalculatedRisk Newsletter.
Zelman says: "I think the housing market is already starting to show some moderation. And I think that it is going to become even more evident as rates are starting to back up. And the continued upward pressure on home prices which is not sustainable is really impacting affordability.
If mortgage rates rise to 4%, the housing market will likely slow, but we saw 4% 30 year mortgage rates as recently as 2019, and the housing market survived. We even saw 5% briefly in October and November 2018, and new home sales slowed a little."