Even though Federal Reserve policymakers voted Wednesday to raise short-term interest rates by 75 basis points, real estate professionals shouldn’t expect too much volatility in mortgage rates, according to the National Association of Realtors’ chief economist.

Speaking at NAR’s Real Estate Forecast Summit on Wednesday just before the Fed’s announcement, Lawrence Yun said the mortgage market had already priced in the expected increase in short-term rates and that further increases are anticipated in September, then another before year’s end and possibly even in the early months of next year.

“Given that [the mortgage market] may have already priced in future activity, it’s possible that we may be actually tapping out in mortgage rates dependent on what the Fed may be doing in the future months,” he told webinar attendees.

“It’s already priced in. So there could be smaller increases in the upcoming months, maybe even smaller declines. If there’s a decline, work with your clients. Maybe they want to strike at a point when mortgage rates slightly decline.

“Now [they] can be more relaxed [and] look at three, four, five homes and then determine which one is the right one. Just like the olden days.”

The days of homebuyers have to make offers immediately and bid over list in order to compete in a bidding war are “over,” Yun said.

“We are steadily returning to normalization,” he added.

Source: NAR Real Estate Forecast Summit, July 27, 2022

That is not to say that the housing market will be seeing widespread home price declines anytime soon. Though the market is shifting and existing-home sales slid for the fifth straight month in June, the median price of existing homes hit a new record high.

Even though Realtors are cutting list prices across the country, they’re much higher today than they were a year ago, Yun said.

“That is why you are getting this conflicting report where home sales are coming down but prices are hitting [a] record high because even as the list price is getting readjusted, this is a very high list price,” he said. “They’re looking at what their neighbor’s home sold for.”

NAR predicts that home sales will decline by 13 percent this year while home prices will rise 11 percent. In 2023, the trade group expects sales to remain flat and home prices to rise 2 percent.

Source: NAR Real Estate Forecast Summit, July 27, 2022

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