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22 | M R EP O RT COVER STORY Back in the Game? Still hampered by high mortgage rates and tight supply, will the spring/summer housing market bring homebuyers back off the sidelines? By Phil Britt W ith mortgage rates about double where they were a little over a year ago, the likelihood they will still in- crease at least slightly, a tight supply of homes for sale, and relatively little new single-family construc- tion, the spring/summer real estate market will be a challenging one. According to the Federal Reserve Bank of St. Louis, the average 30-year fixed mortgage had a 6.5% interest rate at the end of February, compared to 3.76% at the end of February 2022, and just over 3% at the end of 2021. The Mortgage Bankers Association's February 21, 2023, Mortgage Finance Forecast esti- mated $1.873 trillion in 1-4 family home mortgage originations for 2023, down from $2.245 trillion in 2022. Purchase originations were expected to be 76% of mortgages, up from 70% a year ago. Rates are still expected to increase another 50 to 75 basis points this year, perhaps more if inflation continues above the Fed's target rate, but the majority of the rise in rates is likely already in place, economists and mortgage experts agree. Now that most of the increase in interest rates is through, homebuyers are starting to inch back into the market, but many will stay on the sidelines until the interest rate picture is much more in focus, which could be soon, said Eric Fox, Veros Real Estate Solutions' Chief Economist. "A lot of those folks on the sidelines are going to be ready to get back in the market during the spring and summer buying season." Though rates are double what they had been, the earlier rates were lower than they had been for many years, Fox pointed out. "We've had strong markets in the past when interest rates were at 8 and 10%. I think at some point we knew we would get back to higher rates." "If the Fed does get interest rates under control, the bond market will rally and mortgage rates will go down because of that," said Ron Vaimberg , President of Ron Vaimberg International. "No matter what [mortgage] interest rates do, sooner or later, people adapt to what the new market is," Vaimberg said. "We saw that when mortgage rates moved to 5%. At first, everything stopped. Then, all of a sudden, it started going again. Then they jumped to 7% and everything stopped again. Then they came down into the 6% range, and in mid-January, people started coming out of the woodwork and were buying homes at a much faster pace than they were during the prior quarter. Sooner or later, people adapt." Fox and other market experts expect home prices, which have already fallen some, to drop more before increasing again. Though they don't expect the sharp appreciation of 2023, there will be bidding wars and all-cash offers, they agreed. Growth Is Possible T hough rates are up this year, Go Mortgage expects its volume to increase significantly to $1.8 billion this year, company CEO Michael Isaacs said. "Our strategy for growing volume in 2023 is to add pro- ducers, taking market share in areas where we don't have offices today," Isaacs explained. "It's mostly feet on the street, retail officers entrenched in local communities—where most of their business comes from—and their relationships with local Realtors and other referral partners." However, most loan officers won't do more volume than last year, Isaacs added. "If you want to grow, I think you have to add people—mostly good producers with good books of business—and take market share from others. That's the only way to grow in the current market." Earlier in the year, mortgage experts had expected rates to go up a little more early, but level off or even fall by the end of the summer, which could lead to a small refinancing opportunity. However, economic reports that came out in late January and February showed that inflation was still running hot, though not as hot as in the second half of 2022. "I don't think that we will see the refinance wave that we were hoping for," Isaacs said. "It will con-