Higher Mortgage Rates Will Not Slow Single-Family Home Purchase Market in 2022, Freddie Mac Says

On Monday (4-18-22), Freddie Mac released a new Quarterly Forecast, which predicts that the single-family home purchasing market will remain solid in 2022. Sam Khater, Freddie Mac’s Chief Economist, estimates that rising mortgage rates will lead to moderation in homebuyer demand and house price appreciation. However, he believes the housing market will remain a bright spot in the U.S. Economy.

Khater’s specific findings include the following:

• Home sales are expected to be 6.7 million in 2022, decreasing to 6.6 million in 2023. Home sales were 6.9 million in 2021.
• House price growth is expected to average 10.4% in 2022, slowing to 5.0% in 2023. House price growth was 17.8% in 2021.
• The 30-year fixed-rate mortgage (FRM) is expected to average 4.6% in 2022 and 5.0% in 2023. In 2021, the 30-year FRM averaged 3.0%.
• Overall, annual mortgage origination levels are expected to be $3.1 trillion in 2022 and $2.8 trillion 2023, down from $4.8 trillion in 2021.

In a statement prepared to accompany the new forecast, Khater said, “The Federal Reserve’s actions to address inflationary pressure are certainly impacting mortgage rates, which undoubtedly will affect the housing market. While the sharp increase in mortgage rates will lead to a precipitous drop in refinance originations in 2022, demand for housing continues to remain solid, propelled by the large swath of first-time homebuyers and prospective purchasers looking to lock in a mortgage rate before they increase further.”