That would translate into 30- and 15-year **mortgage rates** of approximately 8.50 and 7.70 percent, he says, 3 days ago. In the short term, our interest rate forecast focuses on the Federal Reserve and its attempt to smooth out economic cycles. The Federal Reserve seeks to minimize the production gap (the deviation of GDP from its maximum sustainable level) and, at the same time, to keep inflation low and stable. When the economy overheats (the production gap is positive and inflation is high), like today, the Federal Reserve seeks to raise interest rates to slow growth.

Questions about where the 30-year fixed mortgage rate is heading continue to add complexity to an already difficult decision-making process. It seems that Zillow's optimistic forecasts may not materialize if mortgage rates rise in line with expert projections. Let's look at where mortgage rates could be headed and what that could mean for real estate investors right now. Last week, the Fed recorded a third consecutive increase in interest rates of 75 basis points, raising its target official interest rate range from 3% to 3.25%.

The Fed has raised rates by 75 basis points at each of its last three meetings and is expected to raise rates again in November and December. The slowdown in real estate activity and rising mortgage rates will slow the rate of growth in home prices, according to the MBA. But the bottom line for homebuyers is that mortgage rates are expected to fall next year, Fratantoni said. Other experts are calling for property prices to fall by as much as 20%, should mortgage rates continue to rise.