Freddie Mac reported a 30 year fixed-rate mortgage averaged 5.05% and the highest since its increase from a lowest record of 4.17%.

Economists say that rates have to increase more to squelch a housing market recovery and added that if they do that, the federal government would pull down the rates.

A mortgage researcher Keith Gumbinger says increase in interest rates is unwelcoming and not enough to kill purchases in the housing market.

Patrick Newport, an ISH Global Insight economist says that rates should be higher than 6% to discourage big amount of sales.

They are still lower in historical standards even if rates have increased rapidly. 30 year fixed loans have averaged 6.9% for the past 20 years and averaged a lower of 5.93% average for the past 10 years, Findlay says.

Fourth quarter home sales increased because of low rate and low home prices, according to the National Association of Realtors. It rose 15% from the third quarter. But when federal tax credits boosted its sales, they were 20% lower.

The NAR says that 78 out of 152 metropolitan areas were increased year-over-year for median prices just for single-family homes and it is expected by Newport that its prices were to drop further to turn around during middle of the year.

Other larger markets also posted good price gains because of the strong job growth. Median was increased to 8.1%, 4.2% and 4.1% year over year in Washington, D.C, The Boston region and Austin respectively.
Nar economist Lawrence Yun says that 2010 sales noticeably recovered. Yun expects that it will still manage to gain more despite the increase in rate that he predicts and probably will be 5.5% higher by the end of the year.

But Yun says that job creation will still decrease rates and still improve home sales.

On the other hand, Gumbinger says that refinancing activity will be affected when rates will be increased. According to Mortgage bankers Association 10 year treasury bonds are followed by mortgage rates, which have increased lately.

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