Mortgage rates continued their upward trek. According to Freddie Mac, the 30-year fixed mortgage rate rose to 4.72% from 4.67% the previous week. Since the beginning of the year, mortgage rates have increased by 1.5 percentage points, hurting affordability.

While mortgage rates are rising sharply, home prices also continue to increase. In the first couple of months of the year, home prices rose more than 15% on average compared to a year earlier. Should we expect prices to drop in 2022? The short answer is no.

Looking back to 1979, home prices didn't fall when mortgage rates and inflation were also rising. Specifically, home prices rose about 5% on average between 1980 and 1982. In the meantime, mortgage rates and inflation were much higher than now. Consumers should bear in mind that mortgage rates are still historically low. The historical average rate on a 30-year fixed mortgage is 8%. Meanwhile, the impact of rising mortgage rates may be even smaller this time, as there is also a severe housing shortage. Due to the underbuilding that has occurred for the past decade, there are significantly fewer available homes for sale. Nevertheless, housing demand will remain strong due to favorable demographics and shifts in buyers' preferences as teleworking remains in place. NAR expects home prices to rise 5.1% in 2022.

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.