Last year, the real estate market was significantly influenced by the increase in mortgage rates. The Federal Reserve began raising interest rates in March 2022 to address inflation concerns, impacting various sectors of the market, including housing. The rise in mortgage rates led to a decrease in demand and price appreciation, making affordability a primary challenge for homebuyers. Despite the initial adjustments, this is expected to contribute to a more balanced and stable real estate market.
Looking ahead to late 2023, predicting the real estate landscape remains complex, with uncertainties regarding future mortgage rates and potential fluctuations in home prices. However, industry experts have shared their insights to shed light on the future of the U.S. housing market.
MORTGAGE RATES TO EXHIBIT GREATER STABILITY
The real estate market experienced a significant surge in 30-year fixed mortgage rates in 2022, doubling from around 3% to approximately 7%. However, economists are predicting a less dramatic shift for this year. Possible scenarios include rates reaching as high as 8.5% due to continued inflation, rates averaging 7 to 7.5% if inflation slows down, or rates dropping closer to 5% if rising interest rates trigger a recession.
Forecasts from Realtor.com, the Mortgage Bankers Association, and Fannie Mae offer varying perspectives on the direction of mortgage rates in 2023, with projections of modest decreases or fluctuations throughout the year.
It is important to note that predicting mortgage rates with certainty is challenging. Instead of trying to time the market, it is advisable to consider personal circumstances when making real estate decisions. Exploring different mortgage options, such as adjustable rates and points, can enhance affordability, and refinancing remains an option for the future. If you need guidance, we can connect you with a trusted mortgage professional to help you explore the best options available.
SALES VOLUME WILL DECREASE, AND INVENTORY WILL INCREASE.
The intense demand witnessed in the home-buying market in recent years has diminished due to increased mortgage rates, making homeownership unaffordable for many prospective buyers.
Economists anticipate a continued decline in home sales this year, leading to a rise in listing inventory and longer days-on-market. However, predictions vary regarding the extent of these trends.
Fannie Mae’s economists project a 20% decline in total home sales in 2023, followed by a 15% rebound in 2024. On the other hand, the National Association of Realtors’ Chief Economist expects a 7% dip in 2023, with a 10% recovery in the subsequent year.
Realtor.com’s Chief Economist predicts a 14.1% decline in existing home sales in 2023, resulting in a nearly 23% increase in inventory. While this may provide more choices for buyers, the housing market is expected to remain relatively tight compared to pre-pandemic levels due to the ongoing shortage of available homes.
For buyers, 2023 could offer new opportunities to find the perfect home, with increased negotiating power. If you’re considering selling, taking prompt action is advisable to stay ahead of the rising competition. We can help you determine your home’s market value and guide you through the process. Contact us for a free consultation and to explore current and upcoming listings that match your criteria.
HOME PRICES ARE EXPECTED TO MAINTAIN A RELATIVELY STEADY LEVEL.
While economists hold different views, the consensus suggests that home prices will remain relatively stable. Low inventory levels are contributing to this stability, with predictions ranging from a slight increase to a modest decrease in prices.
According to Yun, the average median home price nationwide is expected to see a 1% increase in 2023. Fannie Mae projects a modest decrease of around 1.5% in their Home Price Index year-over-year. On the other hand, Hale forecasts a 5.4% increase, while Morgan Stanley predicts a 7% drop from the peak in June 2022.
Despite the varying opinions, economists agree that a housing market crash like the one in 2008 is highly unlikely due to different market conditions. Overall, home values are expected to remain relatively stable.
For buyers, this means that real estate remains a long-term investment that tends to appreciate over time, and there may be favorable deals available in slower markets. If you’re considering buying, we can help you navigate the uncertainties and determine the right timing based on your goals and budget.
If you’re planning to sell, strategizing to maximize your profits is essential. Contact us for recommendations and to determine the potential selling price of your home in the current market.
RENT PRICES ARE EXPECTED TO KEEP RISING.
Rent prices are expected to continue increasing due to limited housing supply, high demand, and inflationary pressures. Experts predict that rent growth will surpass home price growth and historical trends, with a projected national increase of 6.3% in the next 12 months. However, there are signs that the rate of rent price increases may be slowing down slightly, and some analysts anticipate a more modest rise of 3.3% for market-rate rents this year.
Given the ongoing upward trajectory of rent prices, it may be advantageous to consider purchasing a home to establish a fixed mortgage payment and build long-term wealth. If you’re interested in buying a rental property, now could be a favorable time to begin your investment property search. Contact us for a complimentary consultation to discuss your options and explore the potential opportunities available to you.
WE’RE HERE TO GUIDE YOU
While national real estate forecasts provide a broad outlook, it’s crucial to recognize the local nature of the real estate market. As local experts, we possess the knowledge to offer personalized guidance based on your specific area. We understand the factors that impact sales and property values in your neighborhood.
If you’re considering buying or selling a home in 2023, feel free to contact us for a complimentary consultation. Together, we’ll develop a tailored action plan that aligns with your unique real estate goals for this year.
The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.
Sources:
- Forbes –
https://www.forbes.com/advisor/investing/fed-funds-rate-history/ - Bankrate –
https://www.bankrate.com/mortgages/will-mortgage-rates-go-up-in-december-2022/ - Bankrate –
https://www.bankrate.com/real-estate/housing-market-predictions-2023/ - Realtor.com –
https://www.realtor.com/news/trends/2023-the-year-of-the-homebuyer-our-bold-predictions-on-home-prices-mortgage-rates-and-more/ - Mortgage Bankers Association –
https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/mortgage-finance-forecast-dec-2022.pdf?sfvrsn=b584bf7_1 - Fannie Mae –
https://www.fanniemae.com/newsroom/fannie-mae-news/economy-still-expected-enter-and-exit-modest-recession-2023 - Fannie Mae –
https://www.fanniemae.com/media/45801/display - National Association of Realtors –
https://www.nar.realtor/newsroom/nars-lawrence-yun-predicts-us-home-prices-wont-experience-major-decline-could-possibly-rise-slightly - Realtor.com –
https://www.realtor.com/research/2023-national-housing-forecast/ - The New York Times –
https://www.nytimes.com/2022/11/04/realestate/housing-market-interest-rates.html - CNBC –
https://www.cnbc.com/2022/09/28/how-much-higher-rent-will-go-in-2023-according-to-experts.html - Federal Reserve Bank of Dallas –
https://www.dallasfed.org/research/economics/2022/0816
