What conflicting mortgage rate forecasts mean for the housing market in 2022 and beyond

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It’s a safe bet that the Federal Reserve will raise interest rates next year – perhaps as early as the spring – and also reduce its purchases of mortgage-backed securities, which could also push up mortgage rates. . It is less certain where mortgage rates will end and how a sharp rise will affect the hot-water housing market.

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There seems to be little consensus among economics and housing experts. As Fortune reported this week, some real estate insiders believe the hike in rates will shock the housing market, while others argue the market is strong enough to withstand even a sharp rise in prices. rate.

Among those bracing for a big negative impact is the Mortgage Bankers Association, which predicts the 30-year fixed mortgage rate will drop to 4% by the end of 2022, which would represent a gain of almost a point. from the current rate. Such a rate hike could push the median price of existing homes down 2.5% next year after a double-digit hike in 2021, the group said.

This contrasts sharply with recent projections by Realtor.com, which sees median home prices rise 2.9% next year, as GOBankingRates reported earlier this month.

There is also little consensus on the magnitude of the mortgage rate hike. Fortune pointed out Fannie Mae, who predicts that the 30-year average mortgage rate will only rise to 3.3% by the end of 2022. From a homebuyer’s perspective, the difference between a rate 4% mortgage and a 3.3% rate is substantial, amounting to about $ 200 per month on a fixed mortgage of $ 500,000 over 30 years.

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But even if the Mortgage Bankers Association is correct in forecasting a 4% rate at the end of 2022, that doesn’t necessarily mean house prices are going to come down. Nik Shah, CEO of Home.LLC, told Fortune he also expects mortgage rates to hit 4% in a year, but that “house prices will continue to rise. [in 2022], just at a decelerating pace.

His reasoning is that the gap between supply and demand in the US housing market will help support prices, as the available housing stock continues to lag behind demand. Freddie Mac estimates that there is still about 4 million homes in the market to meet current homebuyer demand.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held positions with Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. Her work has also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal, and Business North Carolina magazine. He holds a BA in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting has been recognized by the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story “Saint Christopher” placed second in the Writer’s Digest 2019 short story competition. Two of his short stories appear in With One Eye on the Cows, one anthology published by Ad Hoc Fiction in 2019. His first novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.