There’s never been a more accurate statement regarding forecasting mortgage rates than the one Mark Fleming, Chief Economist at First American, offered last year:
“You know, the fallacy of economic forecasting is: Don’t ever try and forecast interest rates and or, more specifically, if you’re a real estate economist mortgage rates, because you will always invariably be wrong.”
As we headed into 2022, many experts predicted mortgage rates would gradually increase and end the year in the high 3% range. However, it’s late April, and we saw rates pass those figures by April 7th; and most recently, Freddie Mac announced on the 14th that the 30-year fixed-rate mortgage was already at 5%. And on the 19th, just five days later, Mortgage News Daily quoted a rate of 5.35%.
No one knows how swiftly mortgage rates will continue to rise or where we will be at year’s end. However, they haven’t significantly impacted buyer demand, at least to this point. Ali Wolf, Chief Economist at Zonda, explains:
“Mortgage rates jumped much quicker and much higher than even the most aggressive forecasts called for at the end of last year, and yet housing demand appears to be holding steady.”
Through February, home prices, the number of showings, and a number of homes receiving multiple offers all saw an increase. However, much of the spike in mortgage rates, we will not know the impact of the rise in mortgage rates until the March housing numbers become available in early May.
Rick Sharga, EVP of Market Intelligence at ATTOM Data, recently put rising rates into context:
“Historically low mortgage rates and higher wages helped offset rising home prices over the past few years, but as home prices continue to soar and interest rates approach five percent on a 30-year fixed rate loan, more consumers are going to struggle to find a property they can comfortably afford.”
While no one has a crystal ball and knows where rates are headed, experts think they’ll continue to rise in the months ahead. In the meantime, if you’re looking to buy a home, know that increasing rates do have an impact. As rates rise, it’ll cost you more when you purchase a house. So if you’re ready to buy, it may make sense to do so sooner rather than later.
Mark Fleming got it right. Forecasting mortgage rates is an impossible task. However, it’s probably safe to assume the days of attaining a 3% mortgage rate are over. The question is whether that will soon be true for 5% rates as well.