MBA Chart of the Week: Rates and Home Sales

The economy is growing and the job market continues to improve, but slower growth abroad and tighter financial conditions convinced the Federal Reserve to wait at least one more meeting to increase the Fed Funds rate.  

A December lift-off, which now seems likely, would end a seven-year spell during which the Fed Funds rate has remained zero.  

With increasing home values and an improving job market, total home sales (new and existing) in July exceeded 6 million units, the long run average, for the first time since April 2007 on a seasonally adjusted annual basis. 

We continue to expect that rates will trend up over the medium term. Mortgages rates, which have been just above 4 percent recently, are likely to end 2015 closer to 4.3 percent, and could reach 5 percent by the end of 2016.  This increase in rates will lead to a reduction in refinance activity.  However, the continued strengthening of the job market will more than offset the gradual increase in rates, and we continue to forecast stronger housing markets in the year ahead.

Click here to view the Chart of the Week. . For information on other MBA Research products, visit the MBA Research page.   

(Lynn Fisher is vice president of research and economics with the Mortgage Bankers Association; she can be reached at lfisher@mba.org. Joel Kan associate vice president of economic forecasting with MBA; he can be reached at jkan@mortgagebankers.org.)