What To Expect From the 2023 Housing Market

What's Ahead for Mortgage Rates in the 2023 Housing Market?

Moving forward, experts agree it's still going to be all about inflation. If inflation is high, mortgage rates will be as well. But if inflation continues to fall, mortgage rates will likely respond. While there may be early signs inflation is easing, we're not out of the woods just yet. Inflation is still something to watch in 2023.

Right now, experts are factoring all of this into their mortgage rate forecasts for next year. And if we average those forecasts together, experts say we can expect rates to stabilize a bit more in 2023. Whether that's between 5.5% and 6.5%, it's hard for experts to say exactly where they'll land. But based on the average of their projections, a more predictable rate is likely ahead (see chart below):

That means, we'll start the year out about where we are right now. But we could see rates tick down if inflation continues to drop. As Greg McBride, Chief Financial Analyst at Bankrate, explains:

". . . mortgage rates could pull back meaningfully next year if inflation pressures ease."

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In the meantime, expect some volatility as rates will likely fluctuate in the weeks ahead. If we see inflation come back under control, that would be good news for the housing market.

Homes prices will always be defined by supply and demand. The more buyers and fewer homes there are on the market, the more home prices will rise. And that's exactly what we saw during the pandemic.

But last year, things changed. We've seen home prices moderate and housing supply grow as buyer demand pulled back due to higher mortgage rates. The level of moderation has varied by local area - with the biggest changes happening in overheated markets. But do experts think that will continue?

The graph below shows the latest home price forecasts for 2023. As the different colored bars indicate, some experts are saying home prices will appreciate next year, and others are saying home prices will come down. But again, if we take the average of all the forecasts (shown in green), we can get a feel for what 2023 may hold.

The truth is probably somewhere in the middle. That means nationally, we'll likely see relatively flat or neutral appreciation in 2023. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

"After a big boom over the past two years, there will essentially be no change nationally . . . Half of the country may experience small price gains, while the other half may see slight price declines."

As mortgage rates fluctuate, they impact your purchasing power by influencing the cost of buying a home. Even a small dip can help boost your purchasing power. Here's how it works.

The median-priced home according to the National Association of Realtors (NAR) is $379,100. So, let's assume you want to buy a $400,000 home. If you're trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here's how your purchasing power can change as mortgage rates move up or down (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range.

This goes to show, even a small quarter-point change in mortgage rates can impact your monthly mortgage payment. That's why it's important to work with a trusted lender. At EFG, we are a broker and have access to hundreds of loan programs that we can custom tailor to your unique needs. We’ll pull your credit only once yet shop multiple lenders to ensure you get the best deal possible. Reach out to us today if you’re ready to become a homeowner this year!

Can I buy a home this year?

If you’re thinking about buying a home, here are a few questions you can start thinking through as you fine tune your goals for 2023.

1. What's Motivating You?

You're dreaming about making a move for a reason - what is it? No matter what's happening in the market, there are still many compelling reasons to buy a home today. Your needs may have changed in a way your current house can't address, or you could be ready to step into homeownership for the first time and have a space that's truly your own. Use what's motivating you as a guidepost in partnership with an expert advisor to help make sure your move will give you a lasting sense of accomplishment.

2. What Does Your Next Home Look Like?

You know you want to move, but how would you describe your dream home? The available supply of homes for sale has grown, and that could mean more options to choose from when you buy. Just be sure to keep your budget in mind and work with a trusted real estate professional to balance your wants and needs. The better you understand what's essential and where you can be flexible, the easier it can be to find the home that's right for you.

3. How Ready Are You To Buy?

Getting clear on your budget and savings is essential before you get too far into the process. Working with a local agent and a lender early is the best way to make sure you're in a good position to buy. This could include planning how much to save for a down payment, getting pre-approved for a home loan, and assessing your current home equity if your move involves selling your existing house.

 Bottom Line

The 2023 housing market is going to be defined by mortgage rates, and rates will be determined by what happens with inflation. Mortgage rates are likely to fluctuate, but that doesn’t mean you can’t still buy a home. Working with a broker like EFG means that you have access to multiple loan programs and we will shop around for you to get you the best deal. If you’re ready to check homeownership off your 2023 list, let’s connect today!