The 30-year fixed-rate mortgage was back above 3% this week, and economists believe rates will continue to increase over the next few months.

“The combination of rising inflation and consumer spending is driving mortgage rates higher,” says Sam Khater, Freddie Mac’s chief economist. “Shoppers looking to buy a home are fueling a strong demand while ongoing inventory shortages are not improving in the presence of higher home prices. This reality illustrates the challenging situation facing the housing market.”

The 30-year fixed-rate mortgage averaged 3.10% this week, Freddie Mac reports. The National Association of REALTORS® is forecasting that rates will increase to 3.50% by the middle of 2022.

“With more homes to hit the market and higher mortgage rates, expect the housing market to slow down in 2022 but remain above the pre-pandemic level,” Nadia Evangelou, NAR’s senior economist and director of forecasting, writes for the association’s blog.

Freddie Mac reports the following national averages with mortgage rates for the week ending Nov. 18:

• 30-year fixed-rate mortgages: averaged 3.10%, with an average 0.7 point, rising from last week’s 2.98% average. Last year at this time, 30-year rates averaged 2.72%.
• 15-year fixed-rate mortgages: averaged 2.39%, with an average 0.6 point, increasing from last week’s 2.27% average. A year ago, 15-year rates averaged 2.28%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.49%, with an average 0.3 point, dropping from last week’s 2.53% average. A year ago, 5-year ARMs averaged 2.85%.

Freddie Mac reports average commitment rates along with average points to better reflect the total upfront cost of obtaining a mortgage.

National Association of REALTORS®
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Existing-home sales fared strongly in October even as buyers continued to complain there aren’t enough homes on the market. Existing-home sales, which are completed transactions for single-family homes, townhomes, condos, and co-ops, increased by 0.8% in October compared to September, the National Association of REALTORS® reported Monday. Compared to a year ago, however, sales are down 5.8%.

Meanwhile, the inventory of unsold homes fell by 12% in October compared to last year. A limited supply of homes for sale remains an ongoing issue for the housing market against continued strong demand among potential home buyers.

“Home sales remain resilient, despite low inventory and increasing affordability challenges,” says Lawrence Yun, NAR’s chief economist. “Inflationary pressures, such as fast-rising rents and increasing consumer prices, may have some prospective buyers seeking the protection of a fixed, consistent mortgage payment.”

Mortgage rates remain low, although rates are rising. The 30-year fixed-rate mortgage averaged 3.07% in October, up from 2.9% in September, according to Freddie Mac.

Here’s a closer look at key housing indicators from NAR’s latest housing report:

• Home prices: The median existing-home sales price rose 13.1% year over year to $353,900. Prices climbed in all four major regions of the U.S.
• Housing inventories: Total housing inventory at the end of October was 1.25 million units, down 0.8% compared to September. Unsold inventory sits at a 2.4-month supply at the current sales pace.
• Days on the market: Eighty-two percent of homes sold in October were on the market for less than a month. Properties typically remained on the market for 18 days in October, down from 21 days a year ago.
• First-time buyers: First-time buyers comprised 29% of sales in October, down from 32% a year ago.
• Investors and second-home buyers: Individual investors or second-home buyers comprised 17% of sales in October, up from 13% in September and from 14% in October 2020, NAR reports. Investors and second-home buyers tend to make up the biggest bulk of all-cash sales, which accounted for 24% of transactions in October.
• Distressed sales: Foreclosures and short sales accounted for less than 1% of sales in October, equal to October 2020.

A Regional Look at Home Sales

Two of the four major regions of the U.S. posted month-over-month increases in existing-home sales last month. Still, home sales remain strong in most parts of the country even as housing inventories remain low.

“Among some of the workforce, there is an ongoing trend of flexibility to work anywhere, and this has contributed to an increase in sales in some parts of the country,” Yun says. “Record-high stock markets and all-time-high home prices have worked to significantly raise total consumer wealth and, when coupled with extended remote work flexibility, elevated housing demand in vacation regions.”

Here’s how existing-home sales fared across the country in October:

• Northeast: Sales dropped 2.6% in October, reaching an annual rate of 750,000. That marks a 13.8% decline compared to October 2020. Median price: $379,100, up 6.4% from one year ago.
• Midwest: Sales increased 4.2% to an annual rate of 1.5 million in October, a 6.3% decrease compared to a year ago. Median price: $259,800, up 7.8% from October 2020.
• South: Sales rose 0.4% in October, posting an annual rate of 2.78 million, a 3.5% decrease compared to last year. Median price: $315,500, a 16.1% increase from a year ago.
• West: Sales remained stable in October compared to September, staying at an annual rate of 1.31 million. That is down 5.1% from one year ago. Median price: $507,200, up 7.7% from October 2020.

National Association of REALTORS®
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National Association of REALTORS® President Leslie Rouda Smith testified before Congress Wednesday, encouraging lawmakers to further help veterans achieve the American dream of homeownership. The hearing before the House Committee on Veterans Affairs Subcommittee on Economic Opportunity brought together lawmakers and housing industry leaders to brainstorm ways to remove barriers specific to veteran homeownership.

“NAR has a tradition of service: 12% of our members are veterans or have a spouse or partner who is a veteran. That’s about 180,000 strong,” Rouda Smith said during her opening remarks. “The overarching theme in our policy solutions is to afford every veteran the opportunity to build wealth through homeownership.”

Rouda Smith highlighted the importance of strengthening the VA Home Loan Guaranty Program during her testimony, citing its benefits for borrowers and its role in closing the racial homeownership gap. “The VA Home Loan Guaranty program offers many unique benefits, including a zero down payment requirement,” said Rouda Smith. “VA loan delinquency rates are lower than FHA loans and comparable to conventional loans. With more than 90% of veterans choosing a no down payment option, this program shows that prudent underwriting and servicing is key.

“Sixteen percent of Black Americans received financing through the VA in 2018, compared to 9% of White Americans. Clearly, hurdles faced by VA borrowers will disproportionally impact home buyers of color. And, unfortunately, many elements of the VA loan program meant to protect veterans and service members are instead keeping them on the sidelines in today’s housing market.”

Following her testimony, Rouda Smith fielded questions from members of the committee and drew on her expertise as a 36-year real estate veteran in Texas. Committee Chairman Mike Levin (D-CA) brought up the appraisal process. “There are problems with the appraisal process, which can undermine the closing if it is longer than the review period,” Rouda Smith said. “VA appraisers are hard to come by, and the best way to solve that problem is to attract more appraisers to serve them. We need to pay them more.”

During the question-and-answer period of the hearing, Rouda Smith also had the opportunity to promote NAR’s Military Relocation Professional credential, which educates REALTORS® about working with U.S. service members and their families and veterans.

4 Recommendations

Rouda Smith spoke to NAR’s efforts to improve the homebuying process for veterans and offered lawmakers four policy recommendations:

1. Provide greater flexibility to make VA loan borrowers more competitive, noting one of the VA program’s most significant disadvantages has been the limitations on fees.
2. Oppose any increase in funding fees to offset costs associated with non-housing–related expenditures.
3. Ensure veterans and service members understand the advantages of a VA home loan through more robust marketing of the program.
4. Improve the home renovation and rehabilitation program.

Along with NAR, representatives from the U.S. Department of Veterans Affairs, Veterans of Foreign Wars, Veterans United Home Loans, and American Legion were present for the hearing.

National Association of REALTORS®
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Economists predict slower price appreciation, easing inflation, and rising interest rates during NAR’s virtual Real Estate Forecast Summit.

While strong homebuyer demand and inventory shortages will continue into 2022, the housing market is unlikely to repeat this year’s dizzying heights, in which existing-home sales reached their highest point in 15 years with an estimated 6 million sales. Slower growth in home prices, decelerating inflation, and multiple interest rate hikes by the Federal Reserve could contribute to a more normal housing market in the new year, National Association of REALTORS® Chief Economist Lawrence Yun said Wednesday during NAR’s virtual Real Estate Forecast Summit. Yun presented a consensus real estate forecast based on a survey of 20 leading economists.

For 2022, the group of experts predicts that annual median home prices will increase 5.7% and inflation will rise 4%. “Overall, survey participants believe we’ll see the housing market and broader economy normalize next year,” Yun said. In addition, Yun expects existing-home sales will decline to 5.9 million in 2022 and housing starts will increase modestly to 1.67 million as the pandemic’s supply chain backlogs subside.

Housing Affordability Remains a Concern

Even if the market begins to settle down, affordability issues likely will continue to dampen homebuying prospects for many would-be owners. Housing affordability had already reached crisis levels before the pandemic added to the strain, said Todd M. Richardson, general deputy assistant secretary at the Department of Housing and Urban Development’s Office of Policy Development and Research.

However, the Biden administration’s Build Back Better plan offers several programs that have the potential to increase housing access for all. The bill provides $10 billion in down payment assistance for first-generation home buyers, $24 billion for housing choice voucher rental assistance, and $15 billion for the Housing Trust Fund to build and preserve over 150,000 affordable homes for low-income households. “Our programs are about unlocking possibilities,” said Richardson. “Support is needed most for housing in low- to moderate-income communities.”

Manufactured housing offers a potential source of inventory that could help ease the housing crunch. Affordable entry-level homes continue to be among the units in shortest supply, and modern manufactured housing—with its high-quality factory construction and lower per-unit cost—could help fill in some of the gaps, said Lesli Gooch, CEO of the Manufactured Housing Institute. In addition, manufactured homes could offer wealth-building opportunities for buyers. “Research by LendingTree shows that, from 2014 to 2019, the median value of manufactured homes increased by 40%—six points above site-built homes,” said Gooch.

Naa Awaa Tagoe, acting deputy director at the Division of Housing Mission and Goals at the Federal Housing Finance Agency, seconded the call for more affordable housing and shared her agency’s strategies in 2022 for increasing equitable access to homeownership and rentals. Appraisal efficiency, small-balance mortgage purchases and refinances, and low-income housing tax credits are among the division’s top priorities for 2022, said Tagoe.

Regional Differences Could Affect the Housing Market

Housing prices are likely to moderate nationwide, but regional variation could occur in 2022. Overpriced areas with lower predicted population growth will experience a greater slowing of prices compared to those with higher predicted growth, said Ken H. Johnson, associate dean of graduate programs at Florida Atlantic University. “Everyone will experience moderation, but there will be differences,” he said.

Strong building starts in the suburbs could be good news for first-time buyers. Businesses are competing for workers right now, said realtor.com® Chief Economist Danielle Hale, and that means buyers could have more flexibility in choosing where they live. In contrast to Yun, who saw “hidden gem real estate markets” in the South, Hale counseled would-be buyers to look further north. “The Mountain West, pockets of the Northeast, South, and Midwest are all locations where affordability creates incentives,” said Hale.

Demographics Offer Insight Into the Future

Jessica Lautz, NAR’s vice president of behavioral insights and demographics, offered highlights from the 2021 Profile of Home Buyers and Sellers, noting several demographic trends that will continue to affect the housing market into 2022 and beyond:

• Baby boomers want to age in place and will continue to hold onto their homes, contributing to the ongoing inventory shortfall.
• Millennials are the largest generation of potential buyers, but they face significant headwinds, such as low inventory, high prices, and student loan debt.
• A drop in the birth rate to a 100-year low could contribute to continued stagnation in the market: The birth of a child is often a motive to buy, and a child moving out is often an impetus to downsize and sell.

Commercial Offers Opportunities for Growth

Commercial experts on the panel offered their predictions for 2022:

• Multifamily: Rents will likely continue to increase, though part of that accounts for a continued correction from the declines in 2020. Rental units, like single-family homes, are in short supply, and ramping up construction could alleviate some of the strain.
• Industrial: Despite a drop in cap rates, industrial will continue to thrive, with retailers leasing more warehouse space to hold inventory and manufacturers increasing production in the U.S.
• Retail: Brick-and-mortar stores will attract foot traffic with innovations such as livestreaming of products, custom concierge services, and curated local offerings.
• Hotels and lodging: Hotels will continue to struggle with a labor shortage that is affecting capacity. The industry needs to get out the message that hotel jobs are steady, provide good pay, and offer upward mobility.
• Office: This sector is still in the middle of its recovery. The stage is set for growth in the second half of 2022, with central city cores emerging as important hubs for workers commuting from greater distances.

National Association of REALTORS®
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The Consumer Financial Protection Bureau and the Justice Department issued letters to mortgage servicers and housing providers reminding them that military and veteran families who are leaving pandemic-related forbearance plans or renters leaving moratoriums have extra protections under law. They want to ensure that military families and vets are not illegally evicted or foreclosed on.

Service members and vets have extra protections under the Servicemembers Civil Relief Act. That law protects certain servicemembers’ mortgages from being foreclosed upon or the eviction of military families from their homes without court orders. It also allows military families to terminate residential leases early and without penalty when receiving military orders.

The letters from CFPB and DOJ come in response to growing reports of complaints from military families and veterans who have alleged numerous mortgage servicing violations, including inaccurate credit reporting, misleading communications to borrowers, and required lump sum payments for reinstating their mortgage loans.

“The illegal foreclosures of military families in the last crisis was one of the financial industry’s worst failures,” Rohit Chopra, CFPB director, wrote in a statement. A decade ago, mortgage servicers were accused of not following additional protections for military servicemembers and vets, which resulted in numerous settlements with regulators, including a $186 million settlement between the DOJ and some of the nation’s largest mortgage servicers. “The CFPB will be closely watching mortgage servicers and will hold them accountable for illegal tactics perpetuated against military families,” Chopra says.

About 1.25 million borrowers—many of whom are military borrowers—remain in forbearance programs that will expire at the end of the year, CFPB says in a news release.

“The Department of Justice takes seriously its responsibility to safeguard the rights of servicemembers and veterans,” says Kristen Clarke, assistant attorney. “While servicemembers carry the great burdens of this nation, they should not have to worry that their sacrifices will result in economic harm to their families. Mortgage servicers and landlords must ensure that they are in full compliance with federal laws intended to protect servicemembers and their families during military service.”

National Association of REALTORS®
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Home buyers may have felt more determined in November to purchase before 2021 comes to an end and mortgage rates and borrowing costs increase, as largely is forecasted to happen.

Existing-home sales, which include completed transactions for single-family homes, townhomes, condos, and co-ops, rose 1.9% in November compared to October, the National Association of REALTORS® reported Wednesday. Sales, however, are down 2% compared to a year ago.

“Determined buyers were able to land housing before mortgage rates rise further in the coming months,” says Lawrence Yun, NAR’s chief economist. “Locking in a constant and firm mortgage payment motivated many consumers who grew weary of escalating rents over the last year. Mortgage rates are projected to jump in 2022. However, I don’t expect the imminent increase to be overly dramatic.”

Yun has forecast the 30-year fixed-rate mortgage to average 3.7% by the end of 2022. For comparison, Freddie Mac reported 30-year rates averaged 3.12% last week.

Here’s a closer look at key housing indicators from NAR’s latest housing report, reflecting November home sales data:

Home prices continue to rise—but likely not at this pace much longer: The median existing-home price for all housing types was $353,900 in November, up 13.9% from November 2020. Prices rose in every major region of the U.S., with the South registering the highest appreciation in home prices.

Yun expects that inflation and the pace of price appreciation will subside in 2022. Economists at the NAR’s third annual Real Estate Forecast Summit predicted home price increases to moderate at 5.7% next year. Read more news from NAR’s forecast summit: Housing Market Likely to ‘Normalize’ in 2022

Housing inventories move even lower: The number of homes for sale fell 9.8% in November compared to October, and are down 13.3% compared to a year ago. Unsold inventory sits at a 2.1-month supply at the current sales pace. “Supply-chain disruptions for building new homes and labor shortages have hindered bringing more inventory to the market,” Yun says. “Therefore, housing prices continue to march higher due to the near-record-low supply levels.”

Homes continue to sell fast: Eighty-three percent of homes sold in November were on the market for less than a month. Properties typically stayed on the market for just 18 days in November, the same as October but down from 21 days in November 2020.

Investors remain a strong presence: Individual investors or second-home buyers purchased 15% of homes in November, up from 14% a year ago. They also tend to account for the biggest bulk of all-cash sales, which made up 24% of transactions in November. Meanwhile, first-time home buyers continue to struggle to compete. They comprised 26% of sales in November, down from 32% a year earlier.

Regional Breakdown

Here’s a closer look at how existing-home sales fared across the country in November, according to NAR’s sales report:

Northeast: Existing-home sales held steady in November compared to October at an annual rate of 760,000. Sales were down 11.6% compared to November 2020. Median price: $372,500, up 4.7% from one year ago

Midwest: Existing-home sales eked out a 0.7% monthly increase to reach an annual rate of 1.52 million in November. That is down 0.7% from a year ago. Median price: $260,100, a 9% jump from November 2020

South: Existing-home sales increased 2.9% in November, reaching an annual rate of 2.85 million. That marks a 1.1% increase compared to a year ago. Median price: $318,900, up 18.4% compared to a year ago

West: Existing-home sales rose 2.3% in November compared to October, reaching an annual rate of 1.33 million. Sales were down 3.6% compared to a year earlier. Median price: $507,200, up 8.4% from November 2020

National Association of REALTORS®
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Home prices are rising by double-digit numbers, causing increasing concerns around housing affordability. The Commerce Department reported that median sales prices for new homes rose nearly 19% in November, while the National Association of REALTORS® reported existing-home prices jumped by a median of 13.9% annually last month.

As home prices press higher, so is the amount that home buyers are borrowing to pay for a house. The average amount borrowed to finance a home purchase climbed to $414,115 in November, the Mortgage Bankers Association reports.

Housing analysts say a lot of the housing activity lately has been concentrated on the higher end, which could be skewing mortgage amounts higher. But higher home prices and bidding wars have prompted many buyers to stretch their budgets.

Down payments have also gotten higher. The national median down payment recently hit its highest level since at least 2005, ATTOM Data Solutions reports. The median down payment on a single-family home purchased with financing in the third quarter was $27,500, up 41% from $19,502 in the third quarter of 2020.

Many financing experts recommend that housing costs—including mortgage payment, property taxes, insurance, and other recurring housing expenses—not exceed 30% of take-home pay.

National Association of REALTORS®
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