Revisiting History as Mortgage Rates Climb Higher

Thursday, April 1, 2021 by Ivy Zelman & Dennis McGill

Filed under: affordability interest rates macro housing mortgage mortgage rates

No discussion about the health of, and future outlook for, the housing market would be complete without consideration of the mortgage rate environment. During our September 2020 Virtual Housing Summit presentation, we spent considerable time dissecting the various catalysts that were most associated with the booming for-sale market. We concluded at that time that “interest rates are not the only factor, but we believe that they are easily the biggest factor.”

At the same time, the Federal Reserve was on record that short-term interest rates were likely to remain anchored near zero for the foreseeable future, with the majority of committee members forecasting no change through at least 2023. Many industry executives and investors interpreted the stance as equally supportive of record low mortgage rates. In essence, the favorable mortgage rate backdrop was unlikely to change any time soon, according to consensus thinking.

As summarized in the brief video clip below, we disagreed with that position and highlighted the risk of such complacency.

Today, while mortgage rates remain incredibly attractive as measured against history, registering 3.18% as of the latest Freddie Mac survey, this is 53 basis points higher than 2.65% in early January. Just three months into the new year, the anticipated volatility we addressed during our presentation has come to fruition. Those similarly grounded in a well-informed historical perspective are probably not surprised.

Revisiting History as Mortgage Rates Climb Higher

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