Rising interest rates, not necessarily a bad thing?

As many REALTORS and consumers alike have seen interest rates fall to historic lows at the beginning of 2013, rates have climbed back up nearly an entire percentage point in the last 6 months.  While this is sure to have an impact on the housing market and loans, the impact could be positive.  Of course it's natural for consumers to be wary about buying a home when interest rates are on the rise but rates are still far more competitive than they were a few years ago.  

In a recent blog post 2013 National Association of Realtors President, Gary Thomas, gives us his forecast on what rising interest rates could mean for borrowers.  In a nutshell, it's simple economics- mortgage lenders are seeing less demand for refinancing so they have to increase the supply of loan origination to balance the decrease in revenue.  They still have to make money somehow.  How do they do this you ask? Well, it is quite elementary.  Lenders may ease some of the credit standards and excessive stringency to increase their loan origination.  With rising interest rates, banks will need to make sure that credit is available to the highest number of qualified buyers. 

With the possibility of banks lowering the strict standards for loan qualification, it is expected that there will be an influx of new buyers who would have otherwise been denied credit.  It is also my hope that this theory coupled with the paradigm shift to a seller's market will bring more inventory as well.  Available homes on the market have been drastically low since 2011, almost 50% of what was available in certain markets in 2010 and early 2011.  Now that homeowners know prices are going up, they will feel more comfortable bringing their homes to market and we will hopefully see more buyers qualified to purchase these newly listed homes. 

That said, here's a little tidbit of hope from Gary Thomas: "We’re hopeful—and it’s more than just a glimmer—that if the economy can recover as much as it has under tight credit conditions, it may do even better as credit steadily returns to normal."