Mortgage rates set to end 2019 surprisingly low

Mortgage rates will rise from their lower position in the early part of 2019 but will end the year around one percentage point lower than originally expected.

That’s one of the updated projections from realtor.com which was calling for a 5.5% rate by the end of 2019 in its Fall 2018 outlook and is now forecasting it will be 4.5%.

Meanwhile, the forecast for home prices has been boosted to 2.9% from the previous 2.2%; and the forecast for home sales is less pessimistic with a decline of 0.3% compared to the previous 2% drop.

"The 2019 housing market is different than what we predicted in fall 2018, primarily due to an unexpected drop in mortgage rates in January 2019," said Danielle Hale, realtor.com®'s chief economist. "We believe 2019 will be characterized by lower, but still increasing mortgage rates that will buoy home prices and sales by boosting buyers' purchasing power beyond what we initially projected. This will create a slightly hotter, but still cooling housing market relative to the initial forecast five months ago."

Fed patience
The more patient tone from the Fed following its December interest rate decision is the reason for the updated mortgage rates forecast.

It led to lower mortgage rates in January of near 4% and that lower-than-expected rate has informed the year-end forecast.

The lower rates are expected to boost home sales resulting in greater upward pressure on home prices than previously expected.