The ESR Group downgraded its full-year 2022 real GDP growth projection to 2.3% in March, down from 2.8% the previous month. The group noted that many of its forecast’s base assumptions, including the impact of the Russia-Ukraine war on the global economy, represent substantial downside risks to both the macroeconomic and housing outlooks.

“Housing is currently acting as support to an otherwise slowing economy, although it is adding significantly to inflation,” said Duncan. “Even as interest rates are rising and reducing affordability, demographics are still strong supports for demand, and the paucity of existing home supply is supporting new construction and sales. The degree to which monetary ease is capitalized into home values suggests increased risk as rates rise, but this may be offset by some evidence that housing is an intermediate-term hedge against inflation.”

According to the ESR group, the 30-year fixed-rate mortgage will likely hover around 3.8% in 2022 and 3.9% in 2023. Fannie Mae also lowered its housing outlook and now expects total home sales to fall 4.1% in 2022, compared to the 2.4% downturn forecasted in February.

“We expect home purchase loan volume to hold up reasonably well but refinance activity to fall off considerably over our forecast horizon, perhaps totaling only a third of originations, unless there is a drop in mortgage rates, which we do not expect. Nonetheless, from a historical perspective, mortgage rates around 4% for fixed-rate loans is still a consumer-friendly rate for a home purchase,” Duncan said.