By Nathalie Voit
The average rate on a standard 30-year mortgage surged to 4.68% on March 23, up 22 basis points since Friday and 49 basis points higher than just one month ago, according to rates data from Mortgage News Daily.
With the Federal Reserve projecting up to six more rate hikes in 2022, mortgage rates are expected to hover around the 4.5% mark or higher for the near future and certainly not below 4.0% any time soon, according to experts.
“The likely picture is that we won’t see rates under 4% anymore. The chance of rates increasing 20–30 basis points by the end of April is only growing,” said deputy chief economist at Redfin Taylor Marr, according to The Mortgage Reports.
“Inflation, Fed actions, and rising yields on U.S. Treasuries all point towards mortgage rates increasing in April,” reiterated Rick Sharga, executive vice president at RealtyTrac.
The faster-than-expected increase in mortgage rates is pushing many would-be buyers out of the housing market.
According to data from the National Association of Realtors (NAR), existing-home sales in February fell 7.2% from the prior month as monthly payments rose 28% from one year ago. This was the largest fall-off since February 2021, NAR said.
Meanwhile, the market is still posting double-digit gains. Year-over-year, home prices appreciated nearly 19% in 2021, according to data from CoreLogic.
The combination of larger down payments coupled with an already unaffordable housing situation for many may be the final straw.
“That is a double whammy that erodes affordability for homebuyers, especially first-timers,” chief economist at CoreLogic Frank Nothaft said. “First-time buyers are a sizable part of prospective shoppers, and their share of purchases has slipped from one year ago.”
The steep decline in home sales last month is prompting many economists to lower their forecasts for the year based on a consensus estimate of 4.5% by the close of 2022.
“Home prices inflating with higher interest rates together is a toxic brew that forces us to downgrade our forecast for housing sales later this year,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “More bad news is coming your way if you are actively trying to buy a new home.”