Rising inflation and mortgage rates are causing a notable shift in the housing market.  As a result, real estate listings website realtor.com is revisiting its 2022 housing forecast issued in December to make some adjustments.  While the updated forecast shows mortgage rates and home prices are not expected to drop, it's not all bad news for those looking to buy or sell a home.  Danielle Hale, Chief Economist at realtor.com, joins Cheddar News' Closing Bell to discuss.

Closing Bell

Realtor.com Revises 2022 Housing Forecast Amid Rising Inflation, Mortgage Rates

Alright, rising inflation and mortgage rates, they are everything we're talking about causing a noteworthy shift in the housing market. And as a result, real estate listings website realtor.com is revisiting its 2022 housing forecast issued in December, making some adjustments and while it shows mortgage rates and home prices are not expected to drop, it's not all bad news for those looking to buy or sell a home joining us. Now Danielle Hale, chief economist at Realtor dot com, thank you so much for being here. What were some of the major updates to the housing market forecast from realtor dot com for 2022 hit us with both the good stuff and the bad stuff. That's right, well, there is some good and bad in here. The one thing that's probably least welcome from home buyers is that we are going to see higher mortgage rates, that's going to raise the cost of borrowing to buy a home, that's going to create an increasing challenge for buyers in the housing market today. So that's the not fun news on the flip side, because we're going to see higher mortgage rates, we expect home sales to slow a bit From what we had expected. We had expected them to grow in 2022, I think they're actually gonna slow down from 2021 pace as a result of those higher mortgage rates. Um but because of those slowing home sales, we do expect to see more options for home shoppers in the market. So we've been talking about not enough homes for sale and that has been the case over the last three years fairly consistently Fewer and fewer homes available. Fast change is already starting to change. We expect to see about 15% more homes available for sale this year compared to last, which will be welcome news for anyone in the market who's been trying to find a home and just can't. Yeah, definitely. And realtor dot com said its forecast for mortgage rates has been revised upward to reflect the major shift in monetary policy and also the financial conditions over the last six months. What are you expecting from mortgage rates moving forward? And what does it mean for homeowners, potential buyers and sellers? You touched on this just a bit. Um and I realize you don't have a crystal ball, there are so many factors here, but just give us a taste of that. And so we have been expecting mortgage rates to climb throughout 2022, but nowhere near what we're actually going to see. So original forecast called for mortgage rates hit 3.6% by the end of 2022 were already well above that. And we were actually, by the time we got to um early January in essence, mortgage rates have really climbed this year as the Fed has realized it needs to crack down on inflation and adjust short term rates to fight that inflation that has come in pretty consistently above its target expectation. So, um the Fed has rapidly been raising rates. We saw another interest rate increase from the Fed just this week a pretty substantial one. And when those short term rates go up, that tends to push longer term rates higher. And that's what we're seeing. That's one of the reasons we adjusted our forecast to account for those higher mortgage rates. We expect rates to climb more gradually in the second half of the year. Now that the market has had some time to adjust to those higher rates. But that doesn't mean we might not see surprises. Like we saw this week with a bigger than expected jump in short term rates. I I expect we're gonna see mortgage rates come back down a little bit in the next week as people adjust the actual news from the Fed instead of just the rumor. So there may be pockets of opportunity for shoppers in the market by the Freddie Mac uh data that tracks mortgage rates. Mortgage rates were almost at 5.8% this week. That's a pretty substantial jump over last week. But I do expect to see a bit of easing. So there may be some opportunities. But the long term trend for mortgage rates throughout the second half of the year is going to be higher. So if you're shopping, keep an eye on those mortgage rates, think about how it affects your budget. You can use a mortgage calculator. Like you might find that realtor dot com to set those numbers and see what higher mortgage rates really need for your bottom line monthly costs so you can set your home shopping budget accordingly and not be surprised if mortgage rates take up higher. Yeah. So much good information there. I do want to mention the May jobs report because a big thing on people's mind is a potential recession concern just looming overhead layoffs and that report found that while the number of jobs available has not reached its pre pandemic peak employment and income are remaining relatively high right now. What impact do you think that could have on the housing market moving forward? And how is it reflected in the updated forecast from your team? So the jobs market has been one of the most resilient sectors of the economy. We continue to see unemployment very close to record lows that we saw just before the pandemic. The unemployment rate in May was 3.6%. And we continue to see a substantial amount of hiring that's good for workers. It gives them more income and maybe even the ability to negotiate higher income from employers. Um And it gives them in some cases the potential for flexibility which is important for navigating this housing market with home prices going higher, mortgage rates going higher costs are up and the potential buyers can either use higher incomes or flexibility to relocate to a more affordable area to really get creative and find a way to get into a housing market where costs are continuing to rise. Alright, Danielle Hale, chief economist at Realtor dot com, thank you so much for joining us.