Mortgage rates increased in 2022, frustrating many owners who have continued to push forward with their life goals despite an extremely unpredictable market. Still, whether you own a home, intend to buy this year, or plan to sell, 2023 can provide some much-needed stability.
Although many people expected mortgage rates to fall in 2023, Realtor.com shares its predictionswhich he says will likely “disappoint” but “won’t be [give you] neither does the whiplash. Here’s what you need to know.
What can we expect from the real estate market in 2023?
In Realtor.com’s 2023 Trend Predictions, he shared a mix of bullish and disappointing predictions.
Rental prices are expected to rise throughout the year, but “the increases will be much more modest than the huge increases seen earlier this year,” Realtor.com said. Additionally, Realtor.com said, “Property inventory is expected to increase 22.8%.” However, this will not be because more sellers are putting their homes on the market, but rather because properties can stick around longer and slowly accumulate throughout the year.
As for home prices, Realtor.com “predicts they will increase 5.4% year-over-year in 2023” nationwide. While this is good news for many first-time buyers, we can rest assured that we won’t see double-digit increases like we’ve seen during the pandemic.
“Median monthly mortgage payments are expected to be about 28% higher than this year and twice as high as they were in 2021,” Realtor.com said. This is due to house prices remaining high as many sellers try to get the best deal for their property. Additionally, fewer properties have been listed since homeowners locked into lower mortgage rates decided to wait out those swings and higher rates until 2023.
For homeowners, mortgage rates could stay high
Unfortunately, mortgage rates are expected to remain high. Realtor.com predicts “mortgage rates will average 7.4% in 2023, falling to 7.1% by the end of the year.” Although mortgage rates may drop slightly, they are unlikely to drop below 7%. Due to inflation and the Federal Reserve rate hike, mortgage rates will remain high.
We’re unlikely to see COVID-era mortgage rates, which were around 2.5% for a while. And compared to the 2021 average of 3%, mortgage rates in 2023 have more than doubled.
Realtor.com said, “Tenants are already burnt out, facing higher and rising rents and inflation, making it difficult to save for a down payment on a home of their own.” With higher mortgage rates, an “anemic” housing market with few properties to choose from, and high rental prices, first-time buyers can sit and wait for their dream home.
Additionally, Realtor.com “expects the usually busy spring season to be quieter than normal in 2023 as buyers struggle with rising prices and mortgage rates.” Then as Spring is here in the northern hemisphere, one would expect to see fewer homes being bought or sold.
Yet, it is important to point out that mortgage rate studies differ on the actual percentage rate represented. Additionally, Realtor.com said that while it doesn’t “expect the nation to succumb to a major recession, economists aren’t ruling it out entirely.” A recession would alter many of the values and forecasts represented in this study.
For many buyers, sellers, renters and those sitting on their current mortgage rate, 2023 should be a year of stabilization. Although unfortunately this does not guarantee lower rates or lower house prices.