Pacific Union Chief Economist Selma Hepp examines historic mortgage rate trends and forecasts where rates might settle. California housing markets have continued to see robust demand in 2018, driven by favorable demographics and economic growth.
Strong demand coupled with dwindling inventory are the main reasons that home prices have maintained double-digit percent annual increases. Nevertheless, continued increases in mortgage rates are a concern for housing demand going forward, as affordability constraints price more households out of the market.
- Thirty-year, fixed-rate mortgages in 2018 have been rising at the fastest pace in 50 years and reached 4.66 percent for the week ended May 24 before dropping to 4.56 percent this week.
- However, mortgage rates did not increase proportionally to the federal funds rate determined by the Federal Reserve because they are determined by longer-term economic factors beyond solely the influence of central banks and monetary policy.
- There are concerns that if the rate hikes are too aggressive, they could tip the U.S. economy into recession.
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