EPIQ Attendees Expect Higher Rates and Slower Price Growth

Over next year, expect rates up 0.2-0.5% and price-growth deceleration

By Frank Nothaft Housing Affordability, Real Estate

EPIQ2018 attendees represented a broad cross-section of industry professionals, think tank researchers, and government policy makers who have a view on the interest rate and home-price outlook.  These are two of the economic variables that affect housing activity and portfolio risk management.  During my outlook session, but before presenting the CoreLogic forecast for mortgage rates and home-price growth, I polled the attendees to learn their expectations for one year from now.

What will fixed-rate mortgages rates be at EPIQ2019?

Albeit with an occasional dip, mortgage rates have trended higher during the year leading up to EPIQ2018, CoreLogic’s annual client conference, with fixed-rates reaching a seven-year high in May 2018.  Thirty-year, fixed-rate mortgages were about 0.6 percentage points more expensive during EPIQ2018 than one year earlier.  The attendees were asked what they expect the level of mortgage rates would be in one year, at the time of EPIQ2019. 

EPIQ attendeees expect higher mortgage rates

Of all respondents, 7-in-8 expect fixed-rates to be higher in one year (Exhibit 1).  Nearly two-thirds expect rates to rise between 0.2 to 0.5 percentage points, similar to my own view.  But nearly one-fourth expect rates to be up by more than 0.5 percentage points.

How much will the CoreLogic HPI change by EPIQ2019?

Nationally, home-price appreciation has accelerated over the last year.  Comparing the 12-month change in the national index, growth measured by the CoreLogic Home Price Index (HPI) had accelerated by nearly 1 percentage point between May 2017 and May 2018.  Low for-sale inventory and increasing numbers of first-time buyers had contributed to the acceleration.  The attendees were polled on what they expected the one-year price change would be with the release of the May 2019 HPI, the latest that would be available as of EPIQ2019.

EPIQ attendees expect slower home-price growth

Nearly three-fourths of respondents expect price growth to decelerate in the national index during the next year (Exhibit 2).  Two-in-five expect the deceleration to be modest, with the national HPI up 5 to 7 percentage points during the next year, consistent with the CoreLogic HPI Forecast.  But nearly one-third forecast the deceleration to be more severe, with the national index rising less than 5 percentage points.

The expectations were affected by a variety of assumptions each respondent had for how the economy and the housing market may evolve, reflected in the distribution of forecasts among the attendees.  Nonetheless, a large majority of attendees expect higher mortgage rates and slower home-price growth during the next year.

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