Will mortgage rates fall in 2022? Get Brian Icenhower's take on what's happening with house prices and the real estate market in general.
Will mortgage rates fall this year? Today I'm going to dive into a fewmarket forecastsfor the rest of 2022. And I'm going to share some dates with you to back up what I'm saying.Also, download our free Rising Interest Rates = Rising Home Prices infographic.
VIDEO: Will mortgage rates fall in 2022? Get Brian Icehower's version
Rising mortgage rates do not lead to a decrease in buyer demand, quite the opposite.
If we look at historical data, when prices rose, prices rose with them.
The real estate industry and the general public are in a frenzy.Mortgage rates are going up! What will that do to the real estate market? Will mortgage rates go down?I want to address this for several reasons.This is an important concern to consider when communicating with our customers. It also affects how we adjust ourselvesmentalities.
Please understand that I look at historical data when making my market forecasts. This is not speculation. We are able to look at historical trends and understand the impact that interest rates are having on property prices.
Some things always happen when prices go up
- Make yourself comfortable with the lists.Suddenly there is a pause. People stop like deer in front of headlights trying to figure out "what's going on".New entriesdo not enter the market with the same frequency. Why? Potential sellers don't want to lose their "low" interest rate. They adopt the mindset, "Well, let's wait and see." These breaks happen, but they arein the interim.
- House prices continue to rise.If there is even less inventory (due to held offers), prices will go up. In fact, real estate prices rise faster when interest rates rise. Supply is reduced because fewer people are listing their properties for sale while demand remains the same.
- The urgency increases.Rising interest rates will only exacerbate soaring home values. This ultimatelyurgency increasesfor people (who want to buy or sell) to make their move. Therefore rest is temporary.
Will mortgage rates go down? Mortgage rates are not set by the government.
PricesoftFollow the Federal Funds Rate. When the Federal Reserve Chairman sets new interest rates, it's not the mortgage rate. It's the Federal Funds Rate, the interest rate that banks use when they lend each other money.The mortgage rate is actually linked to an open market algorithm, which in turn is closely linked to 10-year Treasury sales.People invest here if they want to do it safely. When people perceive market volatility, they choose the safe investment option.
Because of this, mortgage rates typically follow the federal funds rate. When the economy picks up at a pace that feels too crazy and too "good," the Feds respond by raising interest rates. This is to curb inflation so it doesn't spiral out of control.The mortgage rate usually follows, but not always.
Will Mortgage Rates Fall as the Federal Funds Rate Rises? There have been many times in history when mortgage rates have taken their own course. The federal government has learned to manipulate mortgage rates.
Will mortgage rates fall if the government rigs the system?
In short: Yes, they can. If we look at history, we'll see how much we needed this after the great recession of 2008. They called it "quantitative easing." The government wanted to “quantitatively facilitate” our exit from this recession.Even though the federal funds rate was low, the government decided to manually repurchase mortgage-backed securities to "buy short" the mortgage interest rate.
It doesn't matter on which end of the political spectrum the government currently supports itself. As much as certain parties like to say they want to “cut spending,” no president has done so yet.
Why?There's always a good excuse.Nobody wants to be the president who cuts spending and raises mortgage rates and hurts the economy. So everyone carry on. I'm not sure if they doat any timearrest jail. It could be war, recession, pandemic... you name it.There is always a reason why we must continue to "help" the economy for the benefit of American citizens.Our future generations will likely pay the price, but have for decades.
Will mortgage rates go down? It is possible.
It will be interesting to see if prices go up.There is a good chance that this is not the case.Part of me predicts that if we let the natural open market dictate the rise, mortgage rates will fall. Then we can be more "honest" about what's really going on and be more in touch with reality. When the 2008 recession hit, we learned it wasn't always necessary. We learn to manipulate things.
We said prices are going up! for over 20 years. They still haven't. We will see. I wouldn't say it will happen for sure.
willpowermortgagerates fall? can occur. It's definitely not impossible. If the government decides to "fix" things again, as they did in 2008, I wouldn't be surprised.
Rising mortgage rates could hurt us in two ways
- It could affect property prices.When prices rise, it affects both buyers and sellers. Finally, agents can be impacted when buyers choose to “wait” and sales volume can temporarily drop.
- Rising mortgage rates can lead to a drop in sales volume.This is worrying. Fewer offers mean a lower sales volume for real estate agents. That means there will be a temporary slowdown, a pause. We read reports that the sales volume has been declining from year to year. In February 2022 it was down 5%. To put those numbers in perspective, it's the second highest-volume year in US history. So yes, things are slowing down. But it is not a transcendental difference. Believe me, a pandemic didn't stop us. A war overseas will not hold us back. Even rising interest rates will not slow us down. House prices continue to rise. We will continue to make sales. People will always need a place to live.
Online leads are on a hiatus
Agents who useOnline Lead SourcesYou've probably noticed that those leads are now dwindling. All of your online lead sources like Zillow or Realtor.com aren't delivering a lot of leads right now. Well, that's because we're on pause due to rising interest rates.
During a lull, people don't list their properties for sale.Did you know that 95% of all online leads come from listings? When there are fewer listings, you have fewer potential customers online. Everyone faces this problem now. This is because we are taking a break during a low inventory year as we approach winter. It's the perfect storm to create a small number of entries.
No worries. The lists will come. Spring is here.You will see more ads soon. At this point we will shift our conversation to time management because once again you will have more business than you can handle.These are the ups and downs of the real estate market.
As real estate prices rise and will continue to rise, people are gaining equity in their homes. When people get equity in their homes, they get more money. And when people have more money, what do they do?You spend!That's human nature. It's time to move to a bigger house. Buy holiday homes. Acquisition of investment properties. We live in an open market economy. It's a beautiful thing!
In real estate, we call that inflation."recognition“. We like inflation.Will mortgage rates go down? Probably not, unless the government steps in. And if they don't intervene, interest rates will rise and house prices will rise.
evidence behind my words
At ICC we teach all of our clients to “show, not just tell”. To questions like "Will mortgage rates go down?"Have data ready to support your predictions.And while you're talking to your clients, who are probably freaking out over an article they read online about the housing market crash or the housing bubble bursting, show them the proof.
Average 30-year mortgage rates
Check out this chart showing the change in "average 30-year mortgage rates." Relatively speaking, we're looking pretty good. The 50-year average is around 8%. It's fun to hear people say, "Wow, interest rates are going to 5%! What should I do?!" When you're my age you thinkIt's not a big deal.I've sold most properties in my life when interest rates were in the 8-9% range.
People will continue to buy and sell houses. Take a look back to the 1980s: this is where we saw our all-time highs. It rose to 18.8%. In the 1980s, the average was around 13-14%. Keep that in mind! There was also a real estate boom in the 1980s, which was a time of excess.
Average sales prices of the houses sold
If you look at our Average Selling Price of Homes Sold infographic, you'll see this. Prices continued to rise. Prices nearly doubled in the 1980s, even when interest rates were high. Fees don't stop people from buying and selling. On this chart you can also see where the Great Recession hit. Yes, there was a dip, but it corrected itself within a few years and continued to rise. If people resisted, they would get their capital back and then some.
Increase in rates = increase in house prices
Check out our Rising Interest Rates = Rising Home Prices chart for some really interesting facts that back up my point. Rising mortgage rates do not lead to a decrease in buyer demand, quite the opposite. If you look at each of these different time periods, you'll see that house prices have risen independently of interest rate increases. In fact, you'll find that real estate prices have risen even more during periods when interest rates have risen the most.
Get a FREE download of our Rising Rates infographic at the bottom of this blog.
Mindset test for your real estate customers
The best time to buy is now.You have to keep reminding your customers of this. The urgency has never been greater. Prices are going up and real estate prices are going up. Will mortgage rates go down? Don't count on it. Waiting has never been a worse idea, whether you're a buyer or a seller.
Mindset test for you as a real estate agent
This is the best time to be a real estate agent.lists come; This is just a moment of calm. And when they come, you will be hit again. Check out the data and charts we provide to remind you of historical truths.The sky doesn't fall!Will mortgage rates go down? Don't count on it. Supply is low, demand is high, interest rates fluctuate and prices are constantly rising.
FREE DOWNLOAD: Rising Interest Rates = Rising Home Prices Infographic
Today we bring you our infographic Rising Prices = Rising Home Prices. Download and save. Tell your customers that they want to wait until prices go down.
FREE DOWNLOAD: Rising Interest Rates = Rising Home Prices Infographic
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