As predicted, mortgage rates are starting to rise in early 2022

Back in December, I wrote about where mortgage rates could be headed in 2022.The prevailing thought was that the historically low rates we saw in 2020 and 2021 were unlikely to last forever, and 2022 could be when we see them start to climb.

So far this year, that prediction has been accurate. Rates are up, though they are still below historical norms, which means potential buyers remain in a generally favorable position to finance a purchase. And with inventory challenges persisting, interested buyers are still contending over a relatively small number of homes, which should benefit sellers as prices push upward.

However, the rising interest rates are having some effect on the market. As the article below notes, mortgage applications for both new purchases and refinances are down. New listings were also down for the second straight month, showing the correlation between buyer and seller interest.

This doesn’t necessarily mean that sales will come to a screeching halt. When homes do hit the market, there are still plenty of interested buyers putting in offers.

“We’re forecasting a whirlwind year ahead for buyers, and, if January housing trends are any indication, 2022 competition is already heating up. Homes sold at a record-fast January pace, suggesting that buyers are more active than usual for this time of year,” Danielle Hale, Realtor.com’s chief economist, told CNBC.

If mortgage rates keep climbing steadily, the more likely result is a gradual cooling of the market as the pool of potential buyers shrinks. But coming off the frenetic 2021 selling season, it wouldn’t be too surprising to see the pace slow down in 2022.