According to the Mortgage News Service, Tuesday’s average fixed rate for popular 30-year mortgages was 4.72%. This is 26 basis points more than Friday. Mortgage News Daily.
Due to recent rates spikes, economists now expect lower home sales for the year.
The average 30-year mortgage rate was estimated to be 4.5% as of the end last year according to the majority of estimates. However, this figure is not the final one. the war in UkraineInflation and rising oil prices have all contributed to a rise in interest rates. Rates were at 3.45% in 2021.
Bond yields are rising due to a shift in Fed Reserve policy outlook, which suggests far greater rate rises than anticipated. This 30-year fixed mortgage closely follows the U.S. Treasury yield of 10.0%, currently at its highest point since May 2019.
Matthew Graham is chief operating officer of Mortgage News Daily. He stated that there are a few chances for rates to reach 5%, but not enough to hit 6%. “It’s a quickly moving target in the environment where we legitimately, unexpectedly find us needing to worry about inflation.
The economists expected that the rate would rise slightly in this year’s economic forecasts, but it is now.
Lawrence Yun is now the chief economist at the National Association of Realtors. He predicts that the annual rate will hover around 4.5%, contrary to previous predictions of 4%. NAR predicts that 2022 sales will decline by 3.3%. Yun, however, now expects them to fall between 6% and 8%.
Rates are rising on top of a hot market for housing. The demand remains high, while supply is historically low. This has pressured home prices, which were already up 19% in January year over year, the latest read from CoreLogic.
Frank Nothaft is CoreLogic’s chief economist. “This double whammy erodes affordability to homebuyers and especially first-timers.” First-time buyers make up a large portion of potential shoppers, and their share has fallen from last year. “We will revise our forecast for home sales a bit lower.”
The expectations of home sellers could also change. Realtor.com says that the market is still competitive, but asking prices have slid slightly.
Danielle Hale (chief economist at Realtor.com) wrote that last week’s data indicated a slowdown in asking prices growth, which could indicate sellers’ awareness of tightening buyers’ budgets, as mortgage rates rise.
Hale indicated that while she has not yet revised her sales forecast, she said she might. She notes that rising rents and costs can have a negative impact on home sales.
Hale stated that “Fast rising rents don’t offer any relief” and might keep potential buyers looking for homes so they can lock in the bulk of their housing expenses before inflation rises.
This year’s demographics favor the housing market with over 45 million households between the ages of 26 and 35. These are crucial years for home ownership, first time purchases and household formation. But, these households face economic challenges,” she said.