Why Predicting Mortgage Rates IS HARD (And What Ice Cream Can Teach Us About It)
- Nick Cunningham
- Jun 5
- 2 min read
Updated: Jun 13
To understand why prediction is hard, look no further than a short story about my kids + ice cream.
MY KIDS LOVE ICE CREAM
I head upstairs to get work done, leaving the kiddos downstairs. They know ice cream is in the freezer. They know I’m upstairs and occupied with work.
So what do they do?
They race to the freezer and devour as much ice cream as possible… as quickly as possible.
Although irrational, the behavior is entirely predictable—I set the conditions for it.
THE FOLLOWING WEEKEND
I try to be fun, Dad.
“Boys, to the kitchen!”
“Yes, Dad?”
“Let’s have some ice cream before lunch!” I smile.
“No thanks, Dad, we’re not hungry.”
What the actual heck just happened?!
That was unexpected. They never turn down ice cream.
THE OUTLIER
Confused, I followed them into the family room.
They were engulfed in Moana 2, which had just been released on pay-per-view.
I didn’t know.
Even if I did, I wouldn't have expected Moana 2 to be a desirable substitute for ice cream.
This analogy might be a bit of a stretch, but not by much...
My Kids Behavior Mirrors Human Behavior, Making Prediction Hard
Some of my favorite economists and industry-leading experts deeply understand what drives mortgage rates up and down.
They analyze the past.
They review charts, historical trends, and reports.
They pay hyper-close attention to politics, global markets, economic indicators, inflation, global conflicts... and even the weather.
They also understand humans very well and the behavior of important players in our economy, such as Jerome Powell.
They tally up all of the data and make a prediction.
But Then!
What just happened?
A key economic report didn't come in as expected.
The Federal Reserve makes a surprising statement.
Inflation trends take an unexpected turn.
A global event shocks the market.
Consumer behavior shifts unpredictably.
Etc. Etc. Etc.
Suddenly, all that careful analysis is thrown off course—just like my kids rejecting ice cream before lunch.
Sometimes, experts predict almost everything correctly—and mortgage rates still don’t behave as expected.
It Is Impossible To Bat A Thousand
To get it right all the time, you'd need to:
Know all the data.
Accurately predict everything that’s going to happen.
Understand precisely how humans will react when those things happen.
It’s really, really hard.
So, be nice to your local speculator—they have a tough job.
And remember this when you ask your favorite mortgage or real estate professional, "Where are rates headed?" : )
