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Economist on this year's housing market: 'You'll be disappointed'

This year’s typical home-buying season is looking a bit different as mortgage rates jump higher.

“If you're expecting this spring home-buying season to look like last spring when prices were high, but mortgage rates were relatively low, then you probably are going to be disappointed,” Danielle Hale, the chief economist at realtor.com, recently told Yahoo Finance Live (video above). “However, if your comparison is relative to the pre-pandemic period, we're still seeing home sales up above that point.”

Homebuyers this year are paying about $375 more on their monthly mortgage payment for a median-priced house versus last year, an increase of about 30%, Hale said.

“So that's going to impact people's ability to afford the same prices,” Hale said.

The rate on the average 30-year fixed mortgage increased to 4.67% this week, up from 4.42% a week ago, according to Freddie Mac.

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“That's normally the size of an increase that we might see over the course of several weeks,” Hale said. “And this is not the first time we've seen an increase that large in a one-week period.”

In fact, rates have jumped three-quarters of a point in the last three weeks — the largest three-week increase since May 1987. Since the start of the year, rates are up 1.56 percentage points.

“[Rates] already surpassed our original expectations for the year,” Hale said. “It's very likely to hit 5% before the end of the year.”

Typically by this time of the year, there are more homes on the market for sale. The inventory of existing homes increased slightly to 870,000 at the end of February, up 2.4% from January, according to a report by the National Association of Realtors (NAR).

A sold banner is displayed over a For Sale sign in front of a house in Washington, DC, on March 14, 2022. (Photo by Stefani Reynolds / AFP) (Photo by STEFANI REYNOLDS/AFP via Getty Images)
A sold banner is displayed over a For Sale sign in front of a house in Washington, DC, on March 14, 2022. (Photo by STEFANI REYNOLDS/AFP via Getty Images) (STEFANI REYNOLDS via Getty Images)

“We're certainly past that seasonal low, it's just a question of whether or not we're going to see growth this year,” Hale said. “Our forecast expects that we will. We've seen some really healthy construction numbers over the last year. That's going to help add new options for existing homeowners who are looking to trade up.”

Additionally, she said, some homebuyers may “think twice” before making a purchase because of higher housing costs from prices and rates, which may slow sales and allow more inventory to linger on the market longer.

“And so our expectation, our forecast going into 2022 is that we expected home prices to go back into the single-digit territory, roughly around 3%. I think higher mortgage rates are going to hasten our return to that slower price growth.”

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Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda

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