Mortgage Rates And Home Prices Will Rise In 2022

Dated: October 19 2021

Views: 79

Image title

Economists at Fannie Mae expect an increase in mortgage rates and home prices in 2022 due to higher inflation, a tightening of monetary policy, and low home inventory.

Fannie Mae in its October economic forecast said it expects the 30-year fixed rate mortgage to average 3.3% in 2022, up from 3.1% the GSE projected last month. Fannie attributed the uptick in interest rates to the Federal Reserve’s expected tapering of asset purchases, including mortgage backed securities.

For this year, Fannie projects rates to average 2.9%. According to the Freddie Mac PMMS survey, the average 30-year-fixed mortgage rose to 3.05% for the week ending Oct. 14, the highest level since April.

“Even a modest tightening of monetary policy would, of course, impact housing, but we expect the effects to be largely muted given current market conditions,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist.

In terms of home prices, economists at the GSE are forecasting a 16.6% increase in 2021, which is 1.8% higher than projected in September. In 2022, the economists changed the outlook on home price increases to 7.4% from 5.1%.

Despite new single-family home construction being in high demand, supply has been hindered by the low availability of materials and skilled labor. Those obstacles will continue next year, the economists said.

According to the latest forecast, total home sales will decline to 6.54 million in 2022 from 6.77 million sales in 2021. Single-family mortgage origination projections for 2021 remained flat at about $4.3 trillion. Fannie Mae is now projecting single-family originations in 2022 at $3.30 trillion, up from September’s forecast of $3.25 trillion.

“Mortgage rates may rise in response to the tighter environment, but we expect the severe shortage of homes for sale to remain the primary driver of strong house price appreciation through at least 2022, limiting interest rate effects on home sales and home prices,” said Duncan.

Fannie Mae also slashed its forecast for the economy in 2021 for the third consecutive month. Real gross domestic product (GDP), Fannie said, is expected to grow 4.9% this year, compared to the 5.4% it had forecast in September.

Annual inflation for 2021 is expected to be 5.7%, higher than the 5.4% it projected in September. The main contribution will come from the higher energy prices, domestically and abroad.

The economists expect that the Federal Reserve will announce a tapering of asset purchases in its November meeting. Also, the central bank may hike the federal funds rate by 25 basis points in the fourth quarter of 2022, for the first time since December 2018.


Blog author image

Mark Ross

For Mark Ross, founder of Ross NW Real Estate and professional real estate broker, real estate has always been the career of choice. During his 30 years in the industry, Mark has gained experience in ....

Latest Blog Posts

What Fixes Are Mandatory After A Home Inspection

If you’re selling your home, you might wonder if there are common repairs needed after a home inspection. Most buyers, after all, won’t commit to purchasing a place until there’s been a

Read More

3 Ways To Extend Your Outdoor Living Season

Light the Deck or PatioThe sun sets sooner on your outdoor living space in the fall, but that shouldn’t limit the hours you use your deck or patio. Adding low-voltage or solar outdoor lighting

Read More

Pros And Cons Of Buying A House With Cash

In today's low-inventory housing market, homebuyers are looking for any way to get a leg up on the competition when putting in an offer on their desired home.If you have the means, an all-cash offer

Read More

4 Factors Other Than Money For A Seller To Consider

Are you selling your home and reviewing several offers? Congratulations! You’re well on your way to getting as much as possible out of what is likely your largest asset.But when it comes to

Read More