Record low interest rates and the $8,000 tax credit have bolstered a recovering housing market. With the help of these incentives,  2009 has been a year of forward movement and improvements with sales up month-over-month for the past three months.  As the tax credit moves towards its expiration date, a debate remains about its necessity. However, if interest rates rise, and no tax credit is available, the momentum from this year’s sales  will probably not carry into next.

Bob Phillips blogs about rising mortgage rates:

“With crude oil at its highest levels since October 2008, retail gas is up 8 cents per gallon this week. It’s bad news for home buyers and mortgage rate shoppers.  The same force that’s driving oil higher is linked to rising mortgage rates. We’re talking about the weakening U.S. dollar, which is now at its worst levels versus the euro in 15 months.

Crude oil is priced in U.S. dollars, by the barrel.  When the dollar loses value, more of them are needed to buy the same barrel of oil.  As a result, predictably, the price of crude oil goes up. Now, there are other reasons why crude oil is rising, but the fading U.S. dollar is one of the major ones and it’s why we’re addressing it. The dollar has a similar impact on mortgage rates.”

Buyers that are still waiting for prices to fall may see that happen next year. However, in most desirable areas, pries will not fall far enough to counterbalance the benefits of a sub five percent mortgage and $8,000 back from the government. As Phillips adds, the bottom has passed us by and  buyers should lock in a low mortgage rate before those are gone too.

Click through to read Bob Phillips’ full post.

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