Hovnanian Enterprises' chief executive on Tuesday expressed little concern over what impact an end to the Federal Reserve's bond-buying program might have on mortgage rates and in turn, the housing industry.
A variable mortgage can fluctuate with the benchmark interest rate set by the Fed, which has long cut rates or left them unchanged. If the Fed raises rates, though, the fear is that the interest rate on a mortgage could rise, discouraging potential homebuyers.
But CEO Ara Hovnanian, who has long presided over the sixth-largest American home builder and survived many a housing slump, said there is reason to believe mortgage rates could very well rise without any negative impact on the industry.
After the 1981-82 housing downturn, for example, mortgage rates were 13.4 percent on average in 1983 and yet there were roughly 1.7 million housing starts, he noted.