The risk of rising rates on housing

Monday, 26 Aug 2013 | 5:52 PM ET
The risk of rising rates on housing
Monday, 26 Aug 2013 | 5:07 PM ET
Rising interest rates could slow the housing recovery, Michael Hanson of Bank of America Merrill Lynch says.

Rising interest rates could slow the housing recovery, Bank of America Merrill Lynch Senior U.S. Economist Michael Hanson said Monday.

"It clearly is a risk to the housing outlook because everybody's looking for housing, basically, to be the engine of growth going forward, and it's obviously showing some early signs of pulling back. No surprise in the fact that interest rates are a bit higher," he said.

"I don't think we're fundamentally looking at the housing market stopping a recovery, but I think the pace is going to slow a bit."

(Read more: Expect 'significant' September boost: Jon Najarian)

Hanson, a former economist for the Federal Reserve, said that the sector has better days ahead, factoring in such things as pent-up demand.

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"Housing is in the early stages of a multiyear recovery," he said on CNBC's "Fast Money."

"You want to look at sort of a feel for what overall demand is going to be, so rates are one part of the affordability story."

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Hanson said that rising interest rates might have an immediate effect on the market but not buyers, noting that a move of 50 basis points might mean an extra $60 to $100 in a homebuyer's monthly mortgage payments.

"That's going to take some people out of the market, but that's not going to fundamentally stop the recovery in housing," he added.

Hanson also said that the Fed appeared unlikely to begin September tapering of its $85 billion-per-month asset purchases.

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"The data are not supporting strongly a rush for taper," he said.

By CNBC's Bruno J. Navarro. Follow him on Twitter @Bruno_J_Navarro.

— CNBC's Michael Newberg contributed research to this report. Follow him on Twitter: @MikeNewberg.

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