Mortgage Market Update – Rates Resume Their Upward Climb

By Douglas Katz – 09/03/2022

Per Freddie Mac:

The market’s renewed perception of a more aggressive monetary policy stance has driven mortgage rates up to almost double what they were a year ago. The increase in mortgage rates is coming at a particularly vulnerable time for the housing market as sellers are recalibrating their pricing due to lower purchase demand, likely resulting in continued price growth deceleration.

Highlights and Takeaways:

  • Be cautious of short-term changes impacting your decision making.  We had some small trend reversals in the last few weeks, but they were short lived and those who decided to wait “for rates to drop further” likely got burnt.
  • Although some predictions are for lower rates by 2023, there is a lot of time between now and then with a lot that can happen.  I am less optimistic and, for planning, this is probably a good approach.  Lower rates would be great, but, if they do not come to pass, payments will be at the higher rates and for many that may be problematic.
  • If rates continue, home prices will continue to face downward pressure.  This will potentially keep buyers on the sideline until they have confidence that we are near the bottom.  Sellers will likely continue to obsess on the peak pricing and what they could have made if their timing had been better.
  • As I stress often, anyone who NEEDS to sell.  should be very cautious in this volatile environment.  If there is a court order and a required date for which a transaction needs to occur, great caution and a sense of urgency is necessary.  Nobody knows where the rate peak and home value bottom could be.  If rates continue to rise, some couples emerging from divorce may find that the approval they were sure of for an equity buyout is no longer valid and they may need to sell.  For valuation, if you already have an agreement from the decree, lower values can mean you cannot meet the requirements of the decree.