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Mortgage Rate Predictions and Misconceptions

Written by Matthew Gardner
The Federal Reserve Bank of New York just released their 2023 Housing Survey, which shows how the U.S. population feels about the housing market. Windermere Chief Economist Matthew Gardner digs into the mortgage rate predictions, showing how demographics played a role in the results.
This video on mortgage rate predictions is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.
Mortgage Rate Predictions
Hello there! I’m Windermere Real Estate’s Chief Economist Matthew Gardner. This month we’re going to take a look at the latest SCE Housing Survey, which gives us a really detailed look at consumers’ psyche in regard to the housing market.
I’ve always been fascinated by surveys, as they frequently give me insights that I simply don’t get from just looking at raw data and, as luck would have it, the New York Fed just released its 2023 Consumer Expectations Housing Survey. Now, this particular survey has always given me some great and often surprising insights as to how the U.S. population views the overall housing market. We certainly don’t have time to cover all of the questions that the survey poses, but there was one section I wanted to share with you today as it really resonated with me, and it relates to mortgage rates.
Will mortgage rates continue to rise?
The first question asked was where they expected mortgage rates to be one year from now. And as you see here that, on average, households expected rates to rise all the way up to 8.4%. Although some may see this as extreme, you can see that in the 2022 survey respondents predicted rates would hit 6.7%, almost exactly where they were at the beginning of this March.
And when asked where they thought rates would be three years from now, on average, households expected to see them climb to 8.8%. Now, that’s a rate we haven’t seen since early 1995!
Well, I’m not sure about you, but I was very surprised by these results as they counter just about every analyst’s expectation regarding where rates will be over the next few years. In fact, myself and every economist I know believes that rates will slowly pull back as we move through this year. I haven’t seen a single forecast suggesting that mortgage rates will rise to a level this country hasn’t seen in decades.
But as they say, the devil’s in the details. When I dug deeper into the numbers, it became very clear to me that demographics played a pretty big part in guiding people’s answers. Let me explain.
1-Year Mortgage Rate Expectations by Education
Here the data is broken down by educational achievement. You can see that survey respondents who didn’t have a college degree thought that mortgage rates would rise to 9.4% within a year. But college graduates were far more optimistic, and they expected rates to be in the high 6’s.
3-Year Mortgage Rate Expectations by Education
And when asked to look three years out, respondents without degrees expected rates to break above 10%. While college graduates saw them pulling back a little from their one-year expectations of 6.7%, down to 6.4%.
Now we are going to look at the survey results broken down by housing tenure.
1-Year Mortgage Rate Expectations by Tenure
And here you see that renters expect mortgage rates to be at almost 11% within a year. And homeowners also saw them rising, but only up to 7.3%.
3-Year Mortgage Rate Expectations by Tenure
And over the next three years, renters expected rates to break above 12%. That’s a level not seen since the fall of 1985. But homeowners expected to see rates at a somewhat more modest 7.4%.
So, what does this tell us? I see two things.
Firstly, the rapid increase in mortgage rates that we all saw starting in early 2022 has a lot of people believing that we will see rates continuing to rise, sometimes at a very fast pace, over the next few years. I mean, if it happened before, why can’t it happen again? And this mindset leads me to my second point, which is that it’s very clear that a lot of would-be home buyers just don’t understand how mortgage rates are calculated.
The bottom line here is that I see a potential buyer pool out there that needs educating and that can give an opportunity to brokers to discuss how rates are set and where the market is expecting to see them going forward.
This may alleviate the concerns that many households have who may be thinking that they will never be able to afford to buy a home because of where they expect borrowing costs to be in the future. Education is everything, don’t you agree?
As always, I’d love to get your thoughts on this topic so please comment below! Until next month, take care and I will see you all soon. Bye now.
To see the latest housing data for your area, visit our quarterly Market Updates page.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
If you have further questions and would like to discuss with a Realtor connect with us here.
The Importance of Escrow in Real Estate Transactions

Real estate transactions can be complex and involve a considerable amount of money. Whether you are a buyer or a seller, real estate is often your biggest investment. That is why it is important for both buyers and sellers to protect their interests and ensure that the transaction is completed smoothly. This is where escrow comes in.
What is Escrow?
Escrow is a financial arrangement where a third party holds and regulates the payment of funds required for both the buyer(s) and the seller(s) involved in a transaction. Escrow helps ensure that the transaction is completed smoothly and according to the terms agreed upon by both parties. Both the buyer and the seller provide the escrow agent with written instructions. When all conditions have been met, the escrow officer sends the closing papers to the county recording office, where the new deed is recorded. The escrow officer then releases funds to the seller.
How is Escrow Used in Real Estate Transactions?
In a real estate transaction, escrow is used to ensure that the buyer’s funds are securely held until all the terms of the sale, such as the transfer of the property title, have been completed. In addition, the escrow agent may also be responsible for completing tasks such as ordering a title search, obtaining necessary documentation, and disbursing funds according to the instructions of the parties involved in the transaction. During this process you may hear the term title insurance and you might wonder what it is. Title insurance is like a safety net around your property. Sometimes hidden mistakes in previous deeds, mortgages, easements or other recorded documents might give someone else an ownership stake in the property. It is important for you to get Title Insurance to protect you and your home as it will save you time and money in the future if problems arise. You can learn more about it in our “What is title insurance and why is it important?” blog. Read it here.
In conclusion
Escrow is an important tool that helps to protect the interests of both buyers and sellers in a real estate transaction. It ensures that the transaction is completed smoothly and according to the agreed upon terms, and helps to reduce the risk of disputes or issues arising. If you are buying or selling a property, it is important for you to understand the role of escrow and how it can benefit you.
If you are ready to connect with an agent or have any further questions, please don’t hesitate to connect with us today by clicking here. If you are just getting started on your home buying journey, consider reviewing these real estate terms to help you along the way.
Buying a Home When You Are Self-Employed

If you are self-employed or thinking about becoming self-employed you are not alone. Did you know that roughly one-third of the American workforce is comprised of people who are self-employed and the number continues to rise? Self-employment allows people the flexibility to bring in an income when their life might otherwise not allow them to and in many cases can bring in a significant amount of income. More income and flexibility are incredible, but if you are planning on purchasing a home there are a couple of things to keep in mind. Mortgage lenders have to verify income (minimum of two years), see financial stability, and run your credit score. Let’s discuss these in more detail, see how each of these can be demonstrated to the lender, and what to keep in mind when you are self-employed and preparing to buy a home.
Verify Income:
When you apply for a home loan you have to disclose your income and the lender has to have a way to verify its accuracy. People who are employed turn in a W-2 form that comes from their employer, but when you are self-employed you don’t receive a W-2 so things are a bit more tricky. You may have received 1099’s and these can be helpful, but you might not receive them for ALL the work you have done or do. Typically, self-employed workers will offer their federal tax returns as they are the only complete way to verify income. Keep in mind lenders will oftentimes require two years’ worth of tax returns. If you have been self-employed for less than two years, or you do not have returns for the past two years, contact us so we can help you determine your alternative options.
Financial Stability:
If you are self-employed it’s likely that your income fluctuates month to month. You have to demonstrate to the lender that you are financially stable and that you know how to manage your money. Having savings when self-employed is imperative for several reasons. First, it demonstrates to the lender financial stability, but more importantly, your savings is an indicator as to how much you can put down on a house. The more you can put down for a home, the better your chances of being approved for a loan. This also means you should receive better terms, lower monthly mortgage payments, and reduced costs over the entirety of the loan. Regardless, if you don’t have significant savings but are self-employed you are still able to take advantage of low down-payment options like conventional loans with as low as 3% down, FHA loans requiring only 3.5% down, USDA loans that can have zero down on qualifying homes, zero down VA loans for eligible/qualifying active-duty, veterans and spouses. Check with your local lender to determine what you qualify for. Don’t have a lender and need one? Connect with us and we will help you find the perfect fit.
Credit Score:
Most importantly, the higher your credit score the better! Credit scores offer a solid indication of how you are with your money. If you are thinking about buying it is of the utmost importance for you to check your credit score as soon as possible to determine where your score is at. It takes time to build credit so if your score comes back less than favorable you will have ample time to work on it if you check it sooner rather than later. Not sure how to start building a stronger credit score? We do! Contact us and we will get you pointed in the right direction.
We suggest getting your free credit report once every four months on a rotating cycle from AnnualCreditReport.com who is authorized by federal law. You can get each of the three credit bureaus reports from this site. Review your report for errors and if you find any have them corrected immediately.
If you are self-employed and need help buying or selling a home don’t hesitate to contact us. We know the process might be long but we are here to help you along the way and have your best interest in mind. Contact us today to get connected with an agent to help.
Things to do Today to make you a Homeowner Tomorrow

As the gap between the cost of rent and the cost of a mortgage continues to close, we see an increasing number of renters interested in buying. But how can renters make the transition to owners?
The purpose of this article is to help renters implement three critical changes today to help them successfully purchase a home tomorrow. If implemented correctly, these changes will help renters overcome the feeling of never being able to purchase a home.
Start by talking with a local lender
Do your research. Find a trusted lender in the location you are planning to purchase your home. Why is it important to use a local lender? Each housing market is different depending on location. Despite the similarities in names, what might be happening in San Francisco may not be happening in San Antonio. It is important to talk to a lender that is not only familiar with but understands the current local market and can explain to you what it takes to become a first-time homeowner. Check out our full article here. Your trusted advisor can then look at your specific financial situation and make suggestions to help you navigate the local market, meet your specific needs, and discuss your available options. This conversation can help you build your timeline for when it is right for you to purchase. Having the right team of real estate and lending professionals on your side can help tremendously when planning for your first home. Together they can help you determine your goals, what you can afford, and help you get pre-approved when you are ready. Need help finding a lender? Click here.
Reduce your debt and build your credit
Your first step should be knowing your credit score and what it means. Check out this article here for more information on credit scores. According to the HUD, the average credit score of first-time homebuyers is 716. There are many online tools that can help you determine your credit score. If you don’t already know yours it would be advantageous for you to find out.
If you determine that your score is below 716, don’t freak out.
First, 716 is just an average which means that there are homeowners with credit scores both above and below that number. Knowing your score gives you a snapshot of how you are doing financially and helps you know how to adjust accordingly to reach your goals.
Second, there are numerous ways to increase your credit score BEFORE you apply for your home loan.
- HUD’s number one recommendation is to reduce your debt as much as possible. Start by reducing your current spending. This will not only help you have less debt, but it will also help you have more money to pay down your current debts. Start small, perhaps purchasing one less coffee a week or choosing water instead of the soda or martini. These small sacrifices now will add up to big wins later. We recommend TrueBill as an app that can help find hidden savings by canceling subscriptions you don’t use anymore or negotiating your existing subscriptions down. It can also help you develop and stick to a budget!
- Pay all your bills on time. Set up auto payments to avoid late payments.
- Use your credit card responsibly.
When you have your debt in a manageable place…
Start saving
It might already feel like you are barely making it. But it has been proven that setting aside even small amounts can make it possible for you to save for a down payment on a home over time. Having funds in savings is also taken into consideration when getting pre-approved for a home loan (See why getting pre-approved is imperative). You don’t always need a large down payment when buying a home but you will need a good house fund saved up for ongoing maintenance and repairs.
Many experts suggest using a hidden savings or a “sinking fund” when saving for your down payment. This is an “out of sight out of mind” savings account. Once money goes in you don’t take it back out till you are ready. Make sure you keep it separate from your emergency fund or your short-term savings for expenses. Set small attainable goals that make you feel accomplished rather than the large goal that might feel daunting and overwhelm you. Are you ready for the challenge?
See how long it takes the average person earning a medium-income in America to save for a down payment here.
In conclusion, get some professionals on your team by talking with a lender (ask your trusted Windermere Broker for recommendations) if you don't have an agent contact us here and we will get you connected, build credit, and start saving!
4 Online Resources That will Blow Your Mind!

…and help when buying vacant land on Whidbey Island.
ICGeo
This is a sophisticated GIS mapping tool for Island County that can show layers and layers of geographically specific data overlaid on a map. Just turn on the layers of data you are interested in and search till your heart is content!
Island County Public Portal
Use this tool to look up a parcel number or a street address to determine if there are any site registrations, septic permits, or septic as-builts done for the parcel. It will also disclose any permits a property has recently applied for and its status.
Groundwater Spatial Analysis Report
This tool analyzes the potential groundwater quality at any given spot on the island by grabbing the data on wells within 1/8 mile of the point you choose on the map (or the nearest 40 wells). It automatically generates a phenomenal report. Just submit the application and the report is emailed to you almost immediately. This document will offer you more detailed information on what you get in the report
Washington Coastal Atlas Map
With the Shoreline Photo Viewer, you can compare what has happened to any stretch of shoreline over the last 50 years through photography! This tool uses 5 photo sessions capturing images of our shoreline all the way back to 1970. Even if you are not currently buying waterfront land this is a fun tool to compare what has happened to any section of our shoreline. There are even aerial photos from the 1940s. Check out the image below taken before Rolling Hills or Penn Cove Park were developed.
To find more amazing tools at your disposal or to get help using these tools to find specific information you can call us, and we will connect you with one of our knowledgeable Windermere brokers. You don’t have to be actively selling or buying a home! We just love to help! Contact us here.