A home was put up for sale in Chicago, Illinois, on January 20, 2022.
Scott Olson | Getty Images
According to Mortgage News Daily, the average interest rate on popular 30-year fixed mortgages reached 4.72% on Tuesday, up 26 basis points from Friday.
As a result of the recent surge in interest rates, economists have lowered their home sales forecasts this year.
Most estimates at the end of last year showed that by the end of 2022, average 30-year mortgage rates had reached 4.5%, but the war in Ukraine, rising oil prices and inflation all ignited under interest rates.The price at this time last year was about 3.45%
Changes in the policy outlook from the Federal Reserve have signaled far more rate hikes than expected, pushing up bond yields. The 30-year fixed mortgage is roughly following the 10-year US Treasury yield, the highest level since May 2019.
Matthew Graham, Chief Operating Officer of Mortgage News Daily, said: “This is a rapidly changing goal in this environment, and for the first time since the 1980s, we realized that we needed to be legally and unexpectedly interested in inflation.”
Economists expected interest rates to rise slightly this year, but they are now changing.
Lawrence Yun, chief economist at the National Association of Real Estate Agents, said he previously predicted it to stay at 4%, but this year it expects it to stay around 4.5%. While NAR’s latest official forecast predicts a 3% decline in sales in 2022, Yun now forecasts a 6-8% decline in sales (NAR officially updates the forecast). Is not).
Rising prices are already on top of the sizzling housing market. Demand remains strong and supply remains historically low. This put pressure on home prices, and it’s already risen 19% in January year-over-year, the latest read from CoreLogic.
Frank Nothaft, Chief Economist at CoreLogic, said: “First-time buyers make up a significant portion of future shoppers, and their share of purchases has fallen since a year ago. We’ll revise our home sales forecasts a bit lower.”
Home sellers may also be adjusting their expectations. Despite the highly competitive market, prices fell slightly last week, according to Realtor.com.
“As mortgage rates rise, it may indicate that sellers may be paying attention to tightening buyers’ budgets,” said Daniel Hale, chief economist at Realtor.com. rice field.
Hale said sales forecasts could be revised lower, but haven’t. She points out that while rising costs can affect home sales, there are some offsetting factors such as rent.
“The soaring rents don’t provide any relief and may keep some potential buyers looking for a home so they can lock in most of their housing costs before inflation rises again. I don’t know, “Hale said. ..
“Demographics are also positive for this year’s housing market, with more than 45 million households between the ages of 26 and 35, an important year for household formation and first-time home purchases, but these households. The financial considerations are on the rise. Take on the challenge, “she added.