2023 Housing & Mortgage Market Outlook

The U.S. Housing Market experienced its first real slowdown in the past decade. A big driver for this was the substantial increase in mortgage rates, which negatively impact affordability. According to the Freddie Mac Primary Mortgage Market Survey (PMMS), the average 30 Year Fixed Mortgage Rate approximately doubled, from 3.125% at the start of 2022 to 6.25% at the end of 2022.

The good news is that mortgage rates have already declined from a high of 7% in October to their current level. Economists expect mortgage rates to continue to fall, on average predicting the 30 Year Fixed Rate Mortgage to drop to 5.25% by the end of 2023.Click To Tweet

Overall U.S. economic growth has started slowing in response to 2022’s Fed interest rate hikes, which were being done to curb inflation. It is still too early to see if we will fall into a recession. Inflation should continue to abate next year as the price levels of food, energy and housing start stabilizing, along with a hopeful remediation of supply chain issues.

The National Association of Realtors predicts home sales will decline by 5.8% next year. If home sales do decline next year, then existing housing inventory should grow. This could lead to a decline in home prices, which in tandem with the projected drop in mortgage rates, could spur more homebuyers to take advantage of this increase in affordability. But this might not fully take into effect until the end of 2023.

So, for anyone looking to buy a home in the new year, expect mortgages rates to fall and housing prices to stabilize. If you are making an offer on the purchase of a home, it would still be advantageous to get preapproved with a mortgage lender; even though overall bidding wars aren’t as prevalent anymore, it can still be a competitive market in certain geographic areas.

Written by:

Stephen Casil

Lyons Vice President

Secondary Marketing Manager


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