Rapidly Climbing Mortgage Rates Weigh on the Housing Market
March 22, 2022
Mortgage rates were expected to climb throughout the year as the Federal Reserve enacts a series of interest rate hikes, but mortgage rates are rising faster than expected, leaving the outlook for the housing market less clear.
The average rate on the popular 30-year fixed mortgage hit 4.72% today, climbing 26 basis points higher since just the end of last week. At the same time last year, the average 30-year rate was about 3.45%
Most estimates made at the end of last year saw the average 30-year mortgage rate climbing to 4.5% by the end of 2022, but surging inflation, spiking oil prices, and the war in Ukraine have propelled rates far past that already.
The rapid climb comes as home prices are seeing historic gains, climbing nearly 20% in the last year alone, and the one-two punch of higher home prices and more expensive mortgages may be pricing out potential buyers and slowing home sales.
The chief economist of the National Association of Realtors, Lawrence Yun, tells CNBC that he now expects mortgage rates to hover around the 4.5% range this year, higher than previous forecasts predicting rates would stay closer to 4%. The NAR’s latest official forecast showed sales falling 3% in 2022, but Yun now expects sales will fall 6%-8%.