U.S. Housing Market

Hooray? Higher mortgage rates spurred home sales uptick

December 23, 2010: 3:18 PM ET

The country's economic engine seems to be running in reverse as more expensive borrowing spurs home sales, and an uptick in borrowing sends mortgage rates back down.

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Image by magro_kr via Flickr

The recent surge in mortgage rates, by all rational calculations, should have made America's already troubled housing market worse off. Instead, higher borrowing costs modestly boosted homes sales in November.

Before slipping down slightly this week, mortgage rates had risen for several weeks in a row as yields on 10-year Treasury bills, which largely influence the cost of mortgages, rose. The average rate for a 30-year fixed loan increased to 4.83% in the week ending December 16 from 4.61% the previous week, marking a fourth week of increases, according to Freddie Mac (FRE). The rate increases were some of the highest seen since June of this year.

Intuitively, it would make sense that higher borrowing costs would discourage potential homebuyers. And vice versa. But quite the opposite has happened. More

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