Mortgage rates are surging faster than expected, prompting economists to lower their home sales forecasts

The average rate on the 30-year fixed mortgage has gone up since Friday.

The recent spike in rates has caused economists to lower their home sales forecasts.

The war in Ukraine, rising oil prices and inflation have caused interest rates to go up, even though most estimates at the end of last year had the average 30-year mortgage rate hitting 4.5% by the end of 2022, At this time last year, rates were about 3.45%.

A shift in the policy outlook from the Federal Reserve is pushing bond yields higher. The yield on the 10-year U.S. Treasury is the highest it has been in over a year.

Matthew Graham, chief operating officer at Mortgage News Daily, said that rates have a small chance to top out before hitting 5% and a good chance of topping out before hitting 6%.

The economists expected the rate to rise slightly this year, but that is no longer the case.

The chief economist for the National Association of Realtors now says he expects the rate to stay at 4.5% this year, after previously predicting it would stay at 4%. NAR has not officially updated its forecast, but the official prediction is for sales to fall 3% in 2022.

The housing market is already sizzling from the rise in rates. Demand is strong and supply is historically low. Home prices were up 19% in January over the same month a year ago.

Frank Nothaft, chief economist at Core Logic, said that it was a double whammy that erodes affordability for home buyers.

Home sellers may be adjusting their expectations as well. Despite the competitive market, asking prices slipped slightly last week.

Danielle Hale wrote that last week's data showed the first slowdown in asking price growth since January, in a possible sign that sellers are aware of buyers' tighter budgets.

Hale said she may revise her sales forecast. She points out that rising costs can affect home sales, but there are other factors.

Fast-rising rents aren't offering any relief and may keep some would-be buyers on the hunt for a home, so that they can lock in the bulk of their housing costs before inflation raises the bar yet again.

The demographic is favorable for the housing market this year, with more than 45 million households in the 26-35 age range, which are key years for household formation and first-time home buying. The economic considerations for those households are going to be challenging.