The housing recovery is in for a major pause due to higher mortgage rates. It is not in the numbers now, and it won't be for a few months, but it is coming, according to one noted analyst. The market has seen rising rates before, but never so far so fast; there is no precedent for a 45 percent spike in just six weeks. The spike is causing a sense of urgency now, a rush to buy before rates go higher, but that will be short term. Home sales and home prices will both come down if rates don't return to their lows, and the expectation is that they will not.
Where is the proof of this? We only need look to the $8,000 home buyer tax credit that expired in 2010. The falloff was dramatic.
"That stimulus was so small compared to a 3.5 percent interest rate, it's almost not even a comparable, but it's the only thing I can find," said Mark Hanson, a well-known mortgage analyst in California who predicted many aspects of the mortgage market crash. "When that stimulus went away, new home sales fell 38 percent in a single month, down 25 percent year-over-year, and existing home sales fell 30 percent over a single month, 24 percent year-over year."
(Read More: Rising Rates Sour Housing Market Plans)