Rates are likely to hit 4.5 percent to 5 percent next year. This could put pressure on buyers to act; there are usually options open on buyers for working around higher rates, but buyers in high-priced markets will have more problems. It could also stymie the existing-home sale market as sellers decide to stay put instead of trade up at a higher mortgage rate. Throughout 2015 and 2016, buyers enjoyed historically low mortgage rates for many months — which finally began to increase in mid-November, despite predictions that they’d rise sooner. With such an unusual end to this year, what should real estate agents (and their clients) be expecting in 2017? Inman interviewed housing and economy experts to dig into their thoughts about mortgage rates next year; here is what they told us.
I do not believe we will see any pullback until after the inauguration, but even the best-case scenario suggests that the historically low rates that have been in place for the last few years are firmly in the rear-view mirror, and that the trend will be toward increasing rates through 2017,” said Matthew Gardner, Windermere chief economist.
Mark Fleming, the chief economist at First American, said that his new estimate of next year’s rate movement “shows mortgage rates getting much closer to 5 percent at the end of next year. “Because of that, we estimate that that will reduce the amount of expected home sales by about 200,000 over the course of the entire year, which is roughly a 4 percent decline on our original expectation,” he added.
“I think in December we will see the Fed raising rates and we’ll see more Fed hikes in 2017, and with that I wouldn’t be surprised if the 30-year fixed mortgage rate hits 4.75 percent,” said Svenja Gudell, Zillow’s chief economist.
- Inman News, December 9, 2016