There’s never been a truer statement regarding forecasting mortgage rates than the one offered last year by Mark Fleming, Chief Economist at First American:
“You know, the fallacy of economic forecasting is: Don’t ever try and forecast interest rates and or, more specifically, if you’re a real estate economist mortgage rates, because you will always invariably be wrong.”
Coming into this year, most experts projected mortgage rates would gradually increase and end 2022 in the high three-percent range. It’s only April, and rates have already blown past those numbers. Freddie Mac announced last week that the 30-year fixed-rate mortgage is already at 4.72%.
Danielle Hale, Chief Economist at realtor.com, tweeted on March 31:
“Continuing on the recent trajectory, would have mortgage rates hitting 5% within a matter of weeks. . . .”
Just five days later, on April 5, the Mortgage News Daily quoted a rate of 5.02%.
No one knows how swiftly mortgage rates will rise moving forward. However, at least to this point, they haven’t significantly impacted purchaser demand. Ali Wolf, Chief Economist at Zonda, explains:
“Mortgage rates jumped much quicker and much higher than even the most aggressive forecasts called for at the end of last year, and yet housing demand appears to be holding steady.”
Through February, home prices, the number of showings, and the number of homes receiving multiple offers all saw a substantial increase. However, much of the spike in mortgage rates occurred in March. We will not know the true impact of the increase in mortgage rates until the March housing numbers become available in early May.
Rick Sharga, EVP of Market Intelligence at ATTOM Data, recently put rising rates into context:
“Historically low mortgage rates and higher wages helped offset rising home prices over the past few years, but as home prices continue to soar and interest rates approach five percent on a 30-year fixed rate loan, more consumers are going to struggle to find a property they can comfortably afford.”
While no one knows exactly where rates are headed, experts do think they’ll continue to rise in the months ahead. In the meantime, if you’re looking to buy a home, know that rising rates do have an impact. As rates rise, it’ll cost you more when you purchase a house. If you’re ready to buy, it may make sense to do so sooner rather than later.
Bottom Line
Mark Fleming got it right. Forecasting mortgage rates is an impossible task. However, it’s probably safe to assume the days of attaining a 3% mortgage rate are over. The question is whether that will soon be true for 4% rates as well.


Mortgage rates started out at 3.11% for the average 30-year,fixed at the beginning of the year, and they have just steadily climbed since then – up to 4.67%.

Rates are projected to continue rising, but at a more moderate pace, because the Fed has risen their rate and mortgage rates tend to follow.
So how does this affect home prices? Let’s take a look at the historical impact of rising rates on home prices when mortgage rates rose by more than a percentage point.

Looking back to October of 1993 (about 30 years), we can see an average of about 8% home price appreciation as mortgage rates are rising by more than a percentage point. So, rising rates have not had a negative impact on home prices.
So how do rising mortgage rates affect home sales?

Looking at the same data for the same period of time, we can see an average decrease of 11% in home sales as prices were rising. As rates rise, it can tend to reduce buyer activity – pricing some people out of the market.

It is important to note that first line (October 1993 to December 1994) where mortgage rates rose 2.38% to a final rate of 9.2%. We are NOT looking at a 2.5% increase in mortgage rates right now. That kind of increase is not in the projections. We are in a very, very different environment than we were back then. We are most likely looking at a 1.5% increase.

In rising mortgage rate environments, there is an overall 2% impact on home sales – a negligible impact – where 2005 & 2006 are the outliers leading up to the housing crisis.
Overall, rising mortgage rates don’t have a huge impact on home sales. Why? Because you have to consider the inventory component. Today, we are seeing drastically low inventory – lower than it was in January of 2021, which was a historical low. Home prices are projected to continue rising, because there just aren’t enough homes for sale. Supply and demand are what drives home price appreciation. So, when you see those headlines saying home sales are softening, it’s not because of rising mortgage rates. It’s because there aren’t enough homes to buy.

When we look at months inventory, historically we had between 4.5 and 5 months inventory on hand – a very, very different inventory level than what we have today.

Inflation is driving this increase in mortgage rates, and we can expect it to continue to rise, but it won’t be at as quite a rapid pace as what we’ve seen over the past few weeks.

Home price appreciation will slow, and mortgage rates will slow some of the frenzy. But, we’re not talking about depreciation. We’re talking about deceleration – appreciation at a more moderate rate.

We hope that all helps explain how the rising mortgage rate environment will affect the other factors in the market, so let’s move on to the forecasts for the spring housing market.

We are in a very, very busy market.

Here is the NAR (National Association of Realtors®) Buyer Traffic Map – strong activity overall.

Then, we see very, weak seller traffic overall. So, strong buyer demand combined with the lack of sellers keeps that upward pressure on prices.
![, active listings increased in this country for the first time in six months. If you go back to the fall of last year, around September we started to kind of fall down in active listings, all those being consumed by the buyers in the market. And we’re starting to see a tick up. Very little, but, but nonetheless a tick up. [0:13:47] And the interesting thing is if you look at where we’re at March, 382,000 active listings in the country according to realtor.com. Remember, they factor out all the pending listings and things like that. These are just actives. And go back to March of last year, about 471 active listings, just shy of 100,000 active listings short this March as compared to last year. So we need more listings. We know that across the country. But all of this leading to sort of a bias towards the upside, meaning forecasters that are looking at the market are saying you know what? We thought it was going to be this amount of activity. But we see it being a little bit more. https://www.realtor.com/research/data/](https://www.humrealestate.com/wp-content/uploads/2022/04/14.png)
However, we did see increased active listings in March.


Pending home sales have dropped, overall – not because there’s a lack of demand in the market, but because we can’t sell what we don’t have. Nonetheless, we seem to be in a healthy market.

We’re ahead in showings and activity, indicating, again, strong demand.

Price acceleration is also holding steady, indicating a very competitive market.

And we are still ahead of historical appreciation. Overall, these figures look to a strong spring market.
With all the uncertainty out there, let’s take a quick glance at 5 graphs that break down the most common concerns.

First, active listings as compared to new listings going back to August of 2021. The light blue bars represent active listings each month, and the dark blue bars represent new listings that are taken during the month. Active listings outpace new listings until March, where new listings actually outpace the active listings. This means as soon as something comes on the market, it sells.

Second, the single-family housing units completed tells the story of why it’s so hard to find a home right now – why prices have risen the way they’ve risen. And the simple answer is that for 14 straight years, we’ve been below the 50-year average in new construction, due to the fallout of the housing crisis in 2008. Builders were hit extremely hard, and are building back their capacity – their ability to bring new builds to market. This has constricted supply.

Third, we look at home ownership as a hedge against inflation. When you’re in an inflationary economy, you want to be invested in hard assets that outperform inflation. The light blue represents the inflation rate, and the dark blue represents home price appreciation. Historically, home price appreciation has outperformed inflation (with the exception of the housing crisis).

Fourth, we look at the home price expectation survey – a survey of 100 economists, real estate professionals, and market investor professionals determining what is going to happen with home prices. $96,000 in potential growth in household wealth over the next five years based solely on increased home equity if you purchased an average priced home (about $360,000).

Finally, a look at home price appreciation. Among the seven experts, the average home price appreciation is 6.7%. Not one is forecasting prices to go down.
A recent survey revealed that many consumers believe there’s a housing bubble beginning to form. That feeling is understandable, as year-over-year home price appreciation is still in the double digits. However, this market is very different than it was during the housing crash 15 years ago. Here are four key reasons why today is nothing like the last time.
1. Houses Are Not Unaffordable Like They Were During the Housing Boom
The affordability formula has three components: the price of the home, wages earned by the purchaser, and the mortgage rate available at the time. Conventional lending standards say a purchaser should not spend more than 28% of their gross income on their mortgage payment.
Fifteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased, and the mortgage rate, even after the recent spike, is still well below 6%. That means the average purchaser today pays less of their monthly income toward their mortgage payment than they did back then.
In the latest Affordability Report by ATTOM Data, Chief Product Officer Todd Teta addresses that exact point:
“The average wage earner can still afford the typical home across the U.S., but the financial comfort zone continues shrinking as home prices keep soaring and mortgage rates tick upward.”
Affordability isn’t as strong as it was last year, but it’s much better than it was during the boom. Here’s a chart showing that difference:
If costs were so prohibitive, how did so many homes sell during the housing boom?
2. Mortgage Standards Were Much More Relaxed During the Boom
During the housing bubble, it was much easier to get a mortgage than it is today. As an example, let’s review the number of mortgages granted to purchasers with credit scores under 620. According to credit.org, a credit score between 550-619 is considered poor. In defining those with a score below 620, they explain:
“Credit agencies consider consumers with credit delinquencies, account rejections, and little credit history as subprime borrowers due to their high credit risk.”
Buyers can still qualify for a mortgage with a credit score that low, but they’re considered riskier borrowers. Here’s a graph showing the mortgage volume issued to purchasers with a credit score less than 620 during the housing boom, and the subsequent volume in the 14 years since.
Mortgage standards are nothing like they were the last time. Purchasers that acquired a mortgage over the last decade are much more qualified. Let’s take a look at what that means going forward.
3. The Foreclosure Situation Is Nothing Like It Was During the Crash
The most obvious difference is the number of homeowners that were facing foreclosure after the housing bubble burst. The Federal Reserve issues a report showing the number of consumers with a new foreclosure notice. Here are the numbers during the crash compared to today:
There’s no doubt the 2020 and 2021 numbers are impacted by the forbearance program, which was created to help homeowners facing uncertainty during the pandemic. However, there are fewer than 800,000 homeowners left in the program today, and most of those will be able to work out a repayment plan with their banks.
Rick Sharga, Executive Vice President of RealtyTrac, explains:
“The fact that foreclosure starts declined despite hundreds of thousands of borrowers exiting the CARES Act mortgage forbearance program over the last few months is very encouraging. It suggests that the ‘forbearance equals foreclosure’ narrative was incorrect.”
Why are there so few foreclosures now? Today, homeowners are equity rich, not tapped out.
In the run-up to the housing bubble, some homeowners were using their homes as personal ATM machines. Many immediately withdrew their equity once it built up. When home values began to fall, some homeowners found themselves in a negative equity situation where the amount they owed on their mortgage was greater than the value of their home. Some of those households decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area.
Homeowners, however, have learned their lessons. Prices have risen nicely over the last few years, leading to over 40% of homes in the country having more than 50% equity. But owners have not been tapping into it like the last time, as evidenced by the fact that national tappable equity has increased to a record $9.9 trillion. With the average home equity now standing at $300,000, what happened last time won’t happen today.
As the latest Homeowner Equity Insights report from CoreLogic explains:
“Not only have equity gains helped homeowners more seamlessly transition out of forbearance and avoid a distressed sale, but they’ve also enabled many to continue building their wealth.”
There will be nowhere near the same number of foreclosures as we saw during the crash. So, what does that mean for the housing market?
4. We Don’t Have a Surplus of Homes on the Market – We Have a Shortage
The supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation. As the next graph shows, there were too many homes for sale from 2007 to 2010 (many of which were short sales and foreclosures), and that caused prices to tumble. Today, there’s a shortage of inventory, which is causing the acceleration in home values to continue.
Inventory is nothing like the last time. Prices are rising because there’s a healthy demand for homeownership at the same time there’s a shortage of homes for sale.
If you’re worried that we’re making the same mistakes that led to the housing crash, the graphs above show data and insights to help alleviate your concerns.
While some homeowners may be tempted to hold off until spring to list their houses, you should know – homebuyers aren’t waiting. Demand is high today as more people are trying to beat rising mortgage rates. As a result, eager buyers are entering the market or moving their plans up so they can make their purchases as soon as possible.
The most recent Consumer Confidence Survey finds that, of those surveyed, the percentage of people planning to buy over the next six months has increased substantially since last fall (see graph below):
As the graph shows, the number of consumers fast-tracking their plans to purchase a home has crept up over the past three months. That indicates many buyers are evaluating their strategy and realizing they should act sooner rather than later. And for homeowners planning to sell, it’s a signal that now may be the time to list.
While more people are moving their plans up, others are actively putting theirs in motion. Time on the market is a great indication that homebuyers are motivated and moving quickly. According to a recent realtor.com report, the average home sold faster this January than any January on record.
Danielle Hale, Chief Economist at realtor.com, notes:
“Homes sold at a record-fast January pace, suggesting that buyers are more active than usual for this time of year.”
What Does That Mean for You?
Homebuyers are rethinking their strategies and moving their plans forward. Others are making their moves today. That means demand for your house isn’t just increasing – it’s high right now.
And because there are so few homes available for determined purchasers to choose from, if you’re planning to sell your house this year, doing so sooner means you can take advantage of high buyer demand before more houses are listed in your neighborhood. Why is this important? Because as more houses are put up for sale, buyers will have more options. But until then, your house will be in the spotlight.
With so many buyers eager to make a purchase, you could benefit by listing your house soon.

With homeownership you can lock in the cost today, and have an asset that increases in value over time, making it a great hedge against inflation.

When looking at home price appreciation versus consumer price increases gong back to the 1970s, we can see how home price appreciation outpaces inflation. Of course, the 2000s was a fundamentally different housing market with an oversupply of homes and lower lending standards. Overall, we can see that buying a home today would not only lock in today’s costs and provide a hedge against inflation, but avoid the rising rental rates.

Rental prices are skyrocketing, and the forecasts project that not only will home values will continue rising, but so will mortgage rates.

Rent increases have been greater than inflation in most years. That means it’s more expensive to rent over time.

For a $200,000 home at 3.5% interest rate today your monthly payment would be $898. However, in Q1 of 2023 when that same home will be $212,600, interest rates will be $3.8%, and now your monthly payment is $990. That’s a difference of $33,314 over the life of the 30-year mortgage. That amount jumps to $66,625 for a $400,000 home.
For a $200,000 home at 3.5% interest rate today your monthly payment would be $898. However, in Q1 of 2023 when that same home will be $212,600, interest rates will be $3.8%, and now your monthly payment is $990. That’s a difference of $33,314 over the life of the 30-year mortgage. That amount jumps to $66,625 for a $400,000 home.
For a $200,000 home at 3.5% interest rate today your monthly payment would be $898. However, in Q1 of 2023 when that same home will be $212,600, interest rates will be $3.8%, and now your monthly payment is $990. That’s a difference of $33,314 over the life of the 30-year mortgage. That amount jumps to $66,625 for a $400,000 home. That’s staggering.

Tangible assets like real estate get more valuable over time making buying a home a good way to spend your money during inflationary times.

This is the Home Price Expectation Survey of 100 economists and data analysts from Q4 of 2021, and represents their house appreciation forecasts by 2026. The group was divided into optimists and pessimists, where optimists projecting the most appreciation over the next 5 years, and the pessimists estimate on the lower end. The pessimists are saying that by 2026 houses will appreciate in value by over 23%. That is pretty significant.


We’ve recently seen a rise in mortgage rates. Some of the last reported numbers have us around 3.55%, which is certainly higher than in some past years, but the housing market is expected to remain pretty competitive this year. It’s about to start feeling like interest rates are going to be high, but they are historically low for the U.S.

Let’s look at two of the mortgage markets – the purchase market and the refinance market. The purchase market is forecasted to grow, and the refinance market is forecasted to constrict – a typical reaction in a rising rate environment.

Let’s tie in the 10-year treasury for a moment. In the last 2 months, the rate on the 10-year treasury yield has skyrocketed. Why is that important?

For the last 50 years, the relationship between the mortgage rate and the 10-year treasury yield has been almost symbiotic. Wherever the 10-year treasury yield goes, there goes the 30-year fixed rate. The Fed does not control interest rates – it can only hope to influence them. Overall, the 10-year treasury yield may be something worth watching.

Month after month we have talked about why we will not see a wave of foreclosures coming to the market, so let’s wrap up this month looking at the latest data.

Loans in forbearance have fallen below one million. This is huge. We are at roughly 780,000 loans in forbearance which equates to 1.4% of mortgages. It is wonderful to see that the forbearance program has really helped homeowners change their situations during such a time of economic uncertainty.


Looking at loans upon exiting the forbearance program, about 38% percent of homeowners are paid in full by either making monthly payments or paying off their loan. Then, about 44% percent are on some sort of repayment plan – homeowners who have been able to make a loan modification or deferral. Unfortunately, 18.2% of homeowners are exiting the forbearance plan without a loss mitigation plan. The bright side of that is, according to Black Knight, 93% of homeowners in a forbearance plan have at least 10% equity, allowing them the opportunity to sell their home. To put this all in perspective, during the housing bubble burst in 2008, we saw 9.3 million homes go into foreclosure. We are in a very different situation today.

We have significantly fewer foreclosures today than we would even in a normal year. Obviously, the forbearance program came allowed us to see record low foreclosures in the most recent years.

Foreclosure activity is at an all-time low. We are at 151,000 foreclosures, whereas in 2007 to 2015, millions of homeowners were going into the foreclosure process. Even if this number of 151,000 doubled, tripled, or even quadrupled, we would be nowhere near where we were when the housing bubble burst.


Mortgage rates have increased significantly since the beginning of the year. Each Thursday, Freddie Mac releases its Primary Mortgage Market Survey. According to the latest survey, the average 30-year fixed-rate mortgage has risen from 3.22% at the start of the year to 3.55% as of last week. This is important to note because any increase in mortgage rates changes what a purchaser can afford. To give you an idea of how rising mortgage rates impact your purchasing power, see the table below:
How Can You Know Where Mortgage Rates Are Headed?
While it’s always difficult to know exactly where mortgage rates will go, a great indicator of where they may head is by looking at the 50-year history of the 10-year treasury yield, and then following its path. Understanding the mechanics of the treasury yield isn’t as important as knowing that there’s a correlation between how it moves and how mortgage rates follow. Here’s a graph showing that relationship over the last 50 years:
This correlation has continued into the new year. The treasury yield has started to climb, and that’s driven rates up. As of last Thursday, the treasury yield was 1.81%. That’s 1.74% below the mortgage rate reported the same day (3.55%) and is very close to the average spread we see between the two numbers (average spread is 1.7).
Where Will the Treasury Yield Head in the Future?
With this information in mind, a 10-year treasury-yield forecast would be a good indicator of where mortgage rates may be headed. The Wall Street Journal just surveyed a panel of over 75 academic, business, and financial economists asking them to forecast the treasury yield over the next few years. The consensus was that experts project the treasury yield will climb to 2.84% by the end of 2024. Based on the 50-year history of following this yield, that would likely put mortgage rates at about 4.5% in three years.
While the correlation between the 30-year fixed mortgage rate and the 10-year treasury yield is clear in the data shown above for the past 50 years, it shouldn’t be used as an exact indicator. They’re both hard to forecast, especially in this unprecedented economic time driven by a global pandemic. Yet understanding the relationship can help you get an idea of where rates may be going. It appears, based on the information we have now, that mortgage rates will continue to rise over the next few years. If that’s the case, your best bet may be to purchase a home sooner rather than later, if you’re able.
Forecasting mortgage rates is very difficult. As Mark Fleming, Chief Economist at First American, once said:
“You know, the fallacy of economic forecasting is don’t ever try and forecast interest rates and or, more specifically, if you’re a real estate economist mortgage rates, because you will always invariably be wrong.”
However, if you’re either a first-time homebuyer or a current homeowner thinking of moving into a home that better fits your changing needs, understanding what’s happening with the 10-year treasury yield and mortgage rates can help you make an informed decision on the timing of your purchase.
If you were thinking about buying a home this year, but already pressed pause on your plans due to rising home prices and increasing mortgage rates, there’s something you should consider. According to the latest report from ATTOM Data, owning a home is more affordable than renting in the majority of the country. The 2022 Rental Affordability Report says:
“. . . Owning a median-priced home is more affordable than the average rent on a three-bedroom property in 666, or 58 percent, of the 1,154 U.S. counties analyzed for the report. That means major home ownership expenses consume a smaller portion of average local wages than renting.”
Other experts in the industry offer additional perspectives on renting today. In the latest Single-Family Rent Index from CoreLogic, single-family rent saw the fastest year-over-year growth in over 16 years when comparing data for November each year (see graph below):
Molly Boesel, Principal Economist at CoreLogic, stresses the importance of what the data shows:
“Single-family rent growth hit its sixth consecutive record high. . . . Annual rent growth . . . was more than three times that of a year earlier. Rent growth should continue to be robust in the near term, especially as the labor market continues to improve.”
What Does This Mean for You?
While it’s true home prices and mortgage rates are rising, so are monthly rents. As a prospective buyer, rising rates and prices shouldn’t be enough to keep you on the sideline, though. As the chart above shows, rents are skyrocketing. The big difference is, when you rent, that rising cost benefits your landlord’s investment strategy, but it doesn’t deliver any sort of return for you.
In contrast, when you buy a home, your monthly mortgage payment serves as a form of forced savings. Over time, as you pay down your loan and as home values rise, you’re building equity (and by extension, your own net worth). Not to mention, you’ll lock in your mortgage payment for the duration of your loan (typically 15 to 30 years) and give yourself a stable and reliable monthly payment.
When asking yourself if you should keep renting or if it’s time to buy, think about what Todd Teta, Chief Product Officer at ATTOM Data, says:
“. . . Home ownership still remains the more affordable option for average workers in a majority of the country because it still takes up a smaller portion of their pay.”
If buying takes up a smaller portion of your pay and has benefits renting can’t provide, the question really becomes: is renting really worth it?
If you’re weighing your options between renting and buying, it’s important to look at the full picture. While buying a home can feel like a daunting process, having a trusted advisor on your side is key.