Economists from Realtor.com predict mortgage rates are far more likely to rise than fall in the near term
The average 30-year mortgage rate topped 7% this week for the first time in two years, raising questions about how much higher it could rise as inflation remains elevated, according to Freddie Mac.
What is causing the rise?
Mortgage rates usually track Treasury yields, which have climbed to 5.11%, its highest level since 2007.
Main factors driving up the yields are mounting federal debt, the energy-fueled inflation stemming from the war in Iran, and the most recent Federal Reserve interest rate hike.
An economist from the National Association of Realtors told CBS News that mortgage rates and oil prices could fall if an Iran deal is reached.
The average 30-year fixed mortgage rate was under 6% in late February for the first time since 2022. Hope grew that housing market activity would normalize this year, until the Iran war erupted and disrupted the spring selling season.
A 1-point rate increase adds $276 a month to a $400,000 mortgage.
Refinancing relief also remains distant, with 15-year fixed rates rising to 6.42%, up from 6.26% last week and 5.49% a year ago.
Economists from Realtor.com predict rates are far more likely to rise than fall in the near term, while Zillow forecasts potential dips to 6.7% by year’s end and 6.3% by late 2027.
Meanwhile, it is a buyer’s market. Post-summer inventory gains are giving homebuyers negotiating room, with over one in five homes seeing price cuts in August, according to Krimmel.
However, economists expect the return of 7% mortgage rates to weigh on housing demand. That’s especially significant for homeowners who locked in rates near 3% during the pandemic and could face thousands more in monthly payments if they move.