Mortgage rates continued to rise this week. In the week ending May 12, 2022, the average rate on a 30-year fixed-rate mortgage climbed from 5.27% to 5.3%, according to Freddie Mac. Average 15-year rates dipped from 4.52% last week to 4.48%. 

 

 

IMG_0248.    Source: Freddie Mac

Monthly Mortgage Rates Increase 

Freddie Mac Chief Economist Sam Khater said, “Homebuyers continue to show resilience even though mortgage rates are causing monthly payments to increase by about one-third as compared to a year ago.” Khater stated, “Several factors are contributing to this dynamic, including the large wave of first-time homebuyers looking to realize the dream of homeownership. In the months ahead, [however,] we expect monetary policy and inflation to discourage many consumers, weakening purchase demand and decelerating home price growth.”

 ATTOM Data, in its first-quarter 2022 U.S. Home Sales Report, shows that "profit margins on median-priced single-family home sales dipped to 47.2%." This number is down from 51.6% in the fourth quarter of 2021. Although even with rapidly growing interest rates, many buyers continue their quest to find a home.

Where Are Mortgage Rates Headed?

Some experts believe interest rates will level out soon. That is excellent news for homebuyers looking to purchase this summer.

IMG_0250.   Source: candysdirt.com

Chief economist at Mortgage Bankers Association (MBA) Mike Fratantoni said, “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.”

On the other hand, some mortgage experts don’t share Fratantoni’s optimism. 

Greg McBride, Bankrate’s chief financial analyst, says, “ More disappointment on the inflation front will power mortgage rates higher.”

With Climbing Mortgage Rates, Home Prices Remain Solid

As mortgage rates continue a months-long ascent, except for a one-week lull, home prices continue to climb. 

Florida Atlantic University economist Ken H. Johnson says, “Eventually mortgage rates will slow down home prices, but it hasn’t happened so far. We should not see rapid upticks in prices as mortgage rates rise. It’s that kind of exuberance that led to past housing downturns.”

Fierce competition for homebuyers who are financially able to buy should remain strong. With many buyers shut out of the market because of rising interest rates and high home prices, bidding wars have toned down but still exist. 

Khalil El-Ghoul

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