Mortgage rates are as high as they’ve been in almost two years, a rise that could hamper buyers and temper the housing market’s hot streak.
The Wall Street Journal reported the average rate for a 30-year fixed-rate loan this week was 3.22 percent, one week after Freddie Mac reported the average rate to be 3.11 percent. It’s a significant rise from 2.65 percent recorded in early 2021 and the highest rate since May 2020.
Interest rates have been historically low during the pandemic, helping to fuel one of the hottest housing markets in recent memory. According to NAR data reported by the Journal, the median price of an existing home in November was $353,900, a 13.9 percent jump year-over-year; median prices for new homes were also at all-time highs.
The peak could spark hesitance for potential homebuyers, especially among those who already own a home and could be less likely to sacrifice their lower rates by selling. Mortgages are also likely to continue to rise as the Federal Reserve prepares to raise short-term interest rates.
Mortgage rates represent “the biggest risk to the market,” Zelman & Associates chief executive Ivy Zelman told the Journal.
“I think that a 4% mortgage rate would kill the housing market,” Zelman, the analyst who called the top of the housing market in 2005, said.
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NAR forecasts mortgage rates to hit 3.7 percent by the end of the year, short of Zelman’s feared number, according to the Journal.
A panel of experts at last month’s National Association of Real Estate Editors conference predicted a cooling of the housing market in 2022. The group cited both increasing mortgage rates and increasing inventory, which has been a nationwide problem this year.
NAR Chief Economist Lawrence Yun predicted sales growth would slow as a result. Additionally, refinance activity is expected to drop by $1 trillion, or 50 percent, according to NAR data.
[WSJ] — Holden Walter-Warner