What Conflicting Mortgage Rate Forecasts Mean for 2022 Housing Market and Beyond

House for sale with red and white real estate sign during fall.

LifestyleVisuals / Getty Images / iStockphoto

It’s a sure bet that the Fed will raise interest rates next year – possibly as early as spring – and also reduce its purchases of mortgage-backed securities, which could raise mortgage rates as well. What’s less certain is where mortgage rates will end up, and how the sharp increase will affect the struggling housing market.

See: Real estate investment guru Mindy Jensen says to avoid these types of real estate
Find: 8 Insider Tips to Get Rich in Real Estate

There appears to be little consensus among economists and housing experts. As Fortune reported this week, some property insiders believe the price hike will shock the housing market, while others maintain that the market is strong enough to withstand even a significant price hike.

Among those preparing for a significant negative impact is the Mortgage Bankers Association, which predicts that the 30-year fixed rate mortgage will rise to 4% at the end of 2022, which would be a gain of nearly one point from the current rate. Such a hike in interest rates could cause the average existing home price to fall by 2.5 percent next year after hitting double digits in 2021, the group said.

This stands in stark contrast to recent forecasts from Realtor.com, which sees average home prices rise 2.9% next year, GOBankingRates reported earlier this month.

There is also little consensus on how high mortgage rates are. Fortune cited Fannie Mae, who predicts that the average 30-year mortgage rate will only rise to 3.3% by the end of 2022. From a home buyer’s perspective, the difference between a 4% mortgage rate and a 3.3% rate is huge, amounting to About $200 per month on a fixed-rate mortgage of $500,000 for 30 years.

Learn: Real Estate Resolutions: How to Organize Your Home Before the New Year
Discover: How to invest in real estate without cash

But even if the Mortgage Bankers Association is correct in its 4% forecast at the end of 2022, that doesn’t necessarily mean home prices will fall. Nick Shah, CEO of Home.LLC, told Fortune that he also expects mortgage rates to reach 4% annually from now, but that “home prices will continue to rise.” [in 2022], only at a slow rate. “

His reasoning is that the gap between supply and demand in the US housing market will help boost prices, as the available home inventory continues to lag behind demand. Freddie Mac estimates that the market is still less than 4 million homes to meet current buyer demand.

More from GOBankingRates

About the author

Vance Kariaga is a London-based writer, editor and journalist who has previously held positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work has also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and North Carolina Business Magazine. He holds a BA in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting has won awards from the North Carolina Press Association, Green Eyeshade Awards and AlterNet. In addition to journalism, he worked in banking, accounting and restaurant management. Vance’s short story, “St. Christopher,” a North Carolina-born who also writes novels, was ranked second in the 2019 Writer’s Digest Short Story Competition. Two of his short stories have appeared in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His first novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.