Economists expect home prices to continue to grow this year, though at a slower pace than in 2021.
Mortgage rates started 2022 with a significant jump, according to Freddie Mac data released Thursday. It’s likely to be the first of many increases in the new year.
The average rate on a 30-year fixed-rate mortgage rose to 3.22% in the week ended Jan. 6, Freddie Mac reported in its Primary Mortgage Market Survey. The increase represents an 11-basis-point gain from the week prior, the largest jump since mid-November. (A basis point is 1/100th of a percentage point.)
The rate is the highest since May 2020, Freddie Mac said. Mortgage rates dropped sharply in the year following the pandemic, falling as low as 2.65% in early January 2021 on a 30-year fixed-rate loan.
It’s likely that this is just the beginning for mortgage rate increases in 2022. “With higher inflation, promising economic growth and a tight labor market, we expect rates will continue to rise,” said Sam Khater, Freddie Mac’s chief economist, in a release. Freddie Mac’s most recent quarterly economic outlook, released in October, forecasts rates averaging 3.5% this year and ending 2022 at 3.7%.
Such a rise would signify a return to prepandemic mortgage rates. The average 30-year fixed-rate mortgage was 2.95% in 2021, 3.11% in 2020, and 3.94% in 2019, according to Freddie Mac data.
Still, such rates would be on the low end of historic averages. The average rate on a 30-year fixed-rate mortgage from 2011 through the end of 2021 was 3.85%, according to Freddie Mac data, while the average rate since Freddie Mac started collecting the data in 1971 is 7.80%.
As rates rise in 2022, economists expect home prices to continue to grow, though at a slower pace than in 2021. A consensus estimate collected by the National Association of Realtors and released in December foresees home prices rising 5.7% in 2022, less than half of 2021’s estimated 14.6% price growth.
Write to Shaina Mishkin at [email protected]