ORC - U.S. homebuying demand to remain solid even as mortgage rates drift higher

Despite U.S. mortgage rates hitting multi-year highs, it's likely that demand for single-family homes will remain solid, according to a report by Freddie Mac.  Generally speaking, a rising interest rate environment tends to scare off those that had considered refinancing their mortgage, for example, which would lead to moderation in homebuyer demand and house price appreciation.  “The Federal Reserve’s actions to address inflationary pressure are certainly impacting mortgage rates, which undoubtedly will affect the housing market,” said Freddie Mac Chief Economist Sam Khater. “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.” Specifically, Khater expects home price growth to average 10.4% this year and slowing to 5.0% in 2023, compared with 17.8% in 2021.

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U.S. homebuying demand to remain solid even as mortgage rates drift higher