Curated Mortgage Intel (CMI)

Expert Forecasts on the Housing Market for Mortgage Lenders and Homebuyers

Recently, the Fed raised interest rates by 50 basis points in what was the biggest rate increase since 2000, with additional hikes looming. On cue, mortgage rates spiked.

But just how far will rates climb, and what will this mean for the mortgage market?

To gain insights, we curated economist and housing market expert predictions to gauge what could be in store for mortgage lenders and homebuyers in the months ahead.

Expert Input

Most housing market experts seem to agree that mortgage rates are unlikely to fall anytime soon as the Fed works to dampen inflation by increasing rates and lessening demand (in theory).

Realtor.com’s Senior Economic Research Analyst Joel Berner made this prediction to Yahoo! Finance:

“With regulators focused on stemming inflation, we’re not likely to see a significant drop in mortgage rates in the near future.”

While Mike Fratantoni, senior vice president and chief economist of the Mortgage Bankers Association, predicted mortgage rates will plateau and refinance demand will dry up in a recent statement by the MBA.

“MBA is forecasting that mortgage rates are likely to plateau near current levels. The financial markets have attempted to price in the impact of Fed actions over this cycle, and they are likely also pricing in the economic slowdown that will result. Once we are past this rate spike and associated volatility, MBA expects that potential homebuyers may be more willing to re-enter the market. Given how much higher rates will remain above the past two years, we do not expect refinance demand to increase any time soon.”

This all leads some to conclude that home price growth will slow. As Moody’s Analytics chief economist Mark Zandi told Forbes:

“With home sales under pressure, the parabolic increase in house prices will soon peter out, and some price declines by mid-next year seem more than likely. With rates now moving quickly higher and affordability and demand being hammered, prices will come under pressure.”

For those on the hunt for a home, some predict homebuyers will face less competition for the remainder of the year. NAR’s Chief Economist Lawrence Yun told MarketWatch this home buying season will be markedly different from last year’s.

“The combination of rising interest rates and rising house prices will push some would-be buyers out of the market, which may result in reduced competition after the summer buying season is over.”

The housing market will cool off, but this will bring much-needed balance, said Zillow Senior Economist Jeff Tucker in a recent article for CNN.

“The market will take years to rebalance from its pandemic trends… So as that happens, and we see price growth begin to slow at some point this year, it’s important to recognize it for what it is: not a crash, but a move toward healthy, and a small step in mitigating our affordability crisis.”

This cooling off is a sentiment that seems to be shared by many. Ralph McLaughlin, chief economist real estate data and analytics company Kukun told Fortune that the hot housing market that defined 2021 is surely a think of the past.

“The red-hot housing market’s days are numbered. While I don’t anticipate a collapse á la the Great Recession, rising mortgage rates and inventory are sure to cool what has been an unprecedented time for the U.S. housing market.”