30-year mortgage rates NOW beginning to exceed 5%, application demand is dropping, lenders are beginning to trim their workforce, and, some even think that rates could hit as high as 8% by 2025….leading, of course, to the assumption that the housing market has peaked.
FIRST: RISING RATES
No matter what happens…the CME gives an 87% probability that the Federal Reserve will increase their key interest rates to 2-2.25% by the end of the year…which, is roughly 8x HIGHER than were we stand today, and - would lead to the “Sharpest Pace of Fed Tightening Since 1994.”
Long term, a survey from the New York Federal Reserve found that “most households expect the interest rate on a 30-year fixed-rate loan to increase to 6.7% next year and reach 8.2% by 2025” - although, the National Association of Realtors believes that the market has ALREADY factored in “all the possible rate hikes,” and therefore…we should expect to see around 5.5% mortgages throughout most of 2023.
SECOND: RISING INVENTORY
The chief economist of Realtor.com says that: “We may see a slower pace of sales in the fall, because rising mortgage rates are pushing up housing costs.”
Zillow believes that: “The stock of existing homes on the market is finally starting to refill, as our March data shows total inventory now rising strongly.”
Redfin states it might be a NET-NEUTRAL, because “higher interest rates will lead to a lock-in effect for homeowners, so they may not list. And it also might reduce demand from home buyers, especially for people really sensitive to prices.”
THIRD: HOME SALES
Throughout February, home sales actually DROPPED 2.7%…and, in March, they dropped another 4.1% - meaning, fewer buyers are purchasing properties now that mortgage rates are increasing. According to Redfin, 12% of homes on its site saw sellers cut prices in the week ending April 9. That was the biggest one-month spike Redfin saw in price cuts since 2015
