Rising Mortgage Rates in the USA: Expert Forecasts and Housing Market Predictions

Mortgage rates continue to rise in USA. As of June 9, the average annual percentage rate (APR) for 30-year fixed mortgages is 7.07%. On the other hand, the average 15-year fixed mortgage APR is 6.48%, according to the latest survey of Bankrateone of the largest mortgage lenders in the country.

This is how mortgage rates will evolve: how much will they rise and how far they can go

In recent months, mortgage rates have risen to their highest level in 20 years, causing a slowdown in purchasing activity, but where is the housing market headed this 2023? Bankrate questioned several real estate experts to come up with a five-year forecast for the real estate market.

According to Lawrence Yun, chief economist at the National Association of Realtors (NAR), mortgage interest rates could continue to rise. According to Yun’s forecasts, 7% could be the level of mortgage rates for the rest of this year and most of 2024. Within two years, he forecasts the rate should return to 5.5 or 6%.

Because the rates are high, Yun sees higher interest on adjustable-rate mortgages over the next year. However, after that, he predicts that 90% of Americans will return to the traditional 30-year fixed-rate mortgage.

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On the other hand, Danushka Nanayakkara-Skillington, assistant vice president of forecasting and analysis at the National Association of Home Builders (NAHB) predicts that rates will drop to around 6% by mid-2024.

Home Price Predictions

According to NAR, the median sales price for existing homes in the country in April of this year was $388,800. For newly built homes, the NAHB data shows that the April median sales price across the country was just over $420,800.

As for the future, Yun does not foresee major changes on grocery price tags nationwide next year and it forecasts fluctuations of about 5 percent one way or the other. However, in five years, he expects prices to have appreciated a total of 15 to 25%.

Will the housing market crash?

According to Yun, although there are some characteristics similar to a housing bubble, the residential real estate market is not expected to burst. Several experts point out that there is no danger of an imminent housing market crash, as inventory is too short. Besides, the standards for obtaining a loan today are much stricter than they were in the Great Recession.