home prices could give up all pandemic gains says whalen even if federal reserve chairman jerome powell and his cohorts stopped hiking policy rates soon the 30year fixed mortgage rate still would climb to 10 according to christopher whalen chairman of whalen global advisors thats because the feds torrid pace of rate increases in 2022 takes time to seep back into mortgage rates especially with the fedfunds rate already jumping to a 3325 range in late september from almost zero a year before lenders only slowly adjust their rates whalen told marketwatch they are not used to seeing rates moving this fast and typically would change rates only once a month or once every other month borrowers pay a premium above riskfree treasury rates on mortgages to help account for default risks the 30year treasury rate rose to 4213 thursday its highest since 2011 according to dow jones market data freddie mac on thursday said the 30year mortgage rate was averaging 694 in its latest weekly survey a 20year high that has severely curtailed demand for new home loans but with us inflation showing no signs of a clear pullback from a 40year high expectations have been running high for the fed to increase its policy rate by another 75 basis points at its november meeting and potentially by the same amount again in december according to the cme fedwatch tool the cme odds on thursday favored a 4755 fedfunds rate to kick off february there is a lag effect in mortgages whalen said adding that even if central bankers decided to hit pause on additional rate increases after their december meeting the 30year mortgage rate still would easily touch 10 by february whalen an investment banker author and specialist focused on banking and mortgage finance urged the us securities and exchange commission in 2008 to move complex and opaque derivatives back into the daylight after banks and investors saw hundreds of billions of dollars in losses tied to structured debt including subprime mortgage exposure he also provided testimony to congress in 2009 about systemic risks of the banking industry now whalen sees another major shakeout coming in mortgage banking as profitability continues to get pinched see chart and the housing market sputters importantly whalen also sees potential for home prices to give back all of their pandemic gains if rates stay high for all of 2023 thats a bigger call than estimates for a 1015 correction in home prices from prices that surged 45 nationally during the pandemic but whalen pointed to speculative home flipping volumes that reached almost 150 billion or 10 of total home sales in 2022 and the cold blanket of doubledigit mortgage rates as catalysts for a steeper home price retreat economists at mizuho securities on thursday pegged median home sales prices as down 25 from their peak in a client note and characterized the housing market as deteriorating but mostly in line with expectations given the sharp jump in mortgage rates mortgage loan rates can be traced directly to the mortgagebacked securities or mbs market which are bonds that trade on wall street mostly with government backing that finance the bulk of the near 13 trillion us mortgage debt market with the feds race to raise rates it has jolted financial markets sunk stocks and led to a stark decline in mortgage bond issuance this year while also making it more expensive for corporations municipalities and households to borrow as part of its inflation fight it will take us months to get the bond market and lending market in sync so people can make money again whalen said stocks closed lower for a second straight day on thursday leaving the sp 500 index off 23 on the year at 366578 and the 10year treasury rate at 4225 its highest since june 2018