"Rates are still low by historical standards and should continue to aid in housing affordability and the ongoing recovery of the housing market," Freddie Mac chief economist Frank Nothaft said in a recent report.
Federal Reserve officials have made additional comments in recent weeks that have calmed the market. Still, the Fed will have to end its stimulus program and raise rates eventually.
Rathbun said there's a big cloud of uncertainty over how the market will eventually react to the end of "easy money" from the Fed - especially given the knee-jerk reaction last month.
"I've been doing this 35 years, and normally you could kind of figure out where the rates were going to go," he said. "But we've never been in this situation . . . nobody's going to know what happens when they start pulling the plug on that program."
He said homebuyers seem to have figured this out as well. Some have jumped in and bought homes in an attempt to beat an increase in rates.
"We see more activity because people now understand that it doesn't take long for interest rates to go up," Rathbun said.
While homebuyers have stepped back up, Rathbun said the agency and local banks have not seen a return of people hoping to negotiate lower rates on their existing homes.
"What has died is the refinance business," he said. "We have seen a large decrease in the refinancing of mortgages for people."
He said he believed the refinance portion of the market will likely stay dead until the next cyclical drop in interest rates.
Rathbun said the key going forward would be how well the Fed manages market expectations. If it does well, he said the market would be able to absorb the higher rates. If not, housing could take a tumble.
"If (rates) just creep up over the next 9 months, it will have no effect here in the Kanawha Valley," he said. "If they go up like they did that last month, it could send shocks. It's that rapid movement that causes chaos."
Contact writer Jared Hunt at busin...@dailymail.com or 304-348-4836.
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