Salient to Investors:

Freddie Mac said the average rate for a 30-yr fixed mortgage rose to 4.46 percent, the biggest one-week increase since 1987. Freddie Mac said rates would have to rise to 7 percent before a home at the US median price would be unaffordable to a family with median income in most parts of the country, and to produce a substantial reduction in demand across the country. The average rate for a 30-yr mortgage over the past 10 years is 5.31 percent.

During the housing market’s boom, existing-home sales reached a peak annual pace of 7.25 million in September 2005 with 30-yr mortgage rates at 5.8 percent, versus an annual pace of 5.18 million last month with mortgage rates below 4 percent.

Buyers are competing for a tight inventory of listings, driving up values. S&P/Case-Shiller says house prices in 20 US cities rose 12 percent in April, the biggest year-over-year gain since March 2006.

Paul Diggle at Capital Economics said higher mortgage rates will not snuff out the housing recovery but another reason to expect a slowdown from the very rapid rate of price rises of late. Capital Economics increased its 2014 mortgage-rate forecast for 30-yr loans to 5 percent.

Joseph Lavorgna at Deutsche Bank Securities said the rate increase will not meaningfully impact the fundamental recovery in demand because affordability remains high relative to history, while rates are also rising partly because of expectations of an improving economy.

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