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Unrealistic mortgage rate expectations could lead the housing recovery astray as the Federal Reserve looks to ease its stimulus program, according to recent reports. Nearly half of consumers cite rising mortgage rates as a top concern for the housing market, but attitudes toward interest rates are somewhat troublesome. Eighty-three percent of buyers believe a ""normal"" interest rate for a fixed-rate, 30-year mortgage loan is less than 5 percent.

The latest Residential Price Index from FNC Inc. shows October prices were up an average 0.3 percent nationally from September to October. The increase was the weakest monthly gain in FNC's index in the last eight months, owing to slow seasonal trends and increased distressed sales. Year-over-year, it was a different story: October's prices were up 6.5 percent nationally compared to last year, accelerating to the fastest growth pace in seven years.

In its final meeting of 2013, the Federal Reserve's Federal Open Market Committee (FOMC) voted to begin dialing back its asset purchase program in January. The committee agreed to scale back its purchases of agency mortgage-backed securities (MBS) to a pace of $35 billion per month; at the same time, purchases of Treasury securities will shrink to $40 billion per month. Together, the cuts represent an overall reduction of $10 billion in purchases each month.