Housing market predictions

The 2023 housing market is ushering in a wave of uncertainty, leaving homeowners, sellers, and buyers feeling uneasy. With mortgage rates on the rise, home sales slowing, and prices fluctuating, it’s crucial to understand the projections of industry experts. In this blog post, we’ll dissect the insights and predictions for the 2023 housing market.

Mortgage Rates on the Move:

As of July 5, the average 30-year fixed mortgage rate approached 7 percent, signaling a substantial increase. The Federal Reserve’s continuous efforts to curb inflation led to a series of rate hikes. Industry experts have varying opinions on where mortgage rates are headed.

Some anticipate further climbs, citing factors like inflation, higher interest rates, and geopolitical tensions. Dennis Shirshikov of Awning predicts 30-year and 15-year mortgage rates to average 8.75 percent and 8.25 percent, respectively. Others, like Robert Johnson of Creighton University, foresee rates reaching 8.50 and 7.70 percent by the end of 2023.

However, there is a glimmer of hope from Rick Sharga, CEO of CJ Patrick Company, who expects rates to peak around 8 percent and 7.25 percent for 30-year and 15-year loans early in 2023. Sharga emphasizes that this outlook hinges on the Federal Reserve’s ability to manage inflation and ease up on aggressive rate increases.

Three Scenarios for Mortgage Rates:

Nadia Evangelou, senior economist at the National Association of Realtors, presents three potential rate scenarios based on the Fed’s future actions:

1. Scenario 1: Continued high inflation prompts frequent Fed rate hikes, potentially pushing mortgage rates near 8.5 percent.
2. Scenario 2: If the Consumer Price Index responds to the Fed’s rate adjustments, inflation may decelerate gradually, stabilizing mortgage rates around 7 percent to 7.5 percent for 2023.
3. Scenario 3: Aggressive rate hikes lead to a recession, causing rates to potentially drop to 5 percent.

Impact on Housing Sales:

Regardless of the scenario, each one foresees a decline in home sales. Higher rates, as in Scenario 1, could lead to a drop of over 10 percent in sales. Scenario 2 predicts a 7 to 8 percent decrease, while in Scenario 3, home activity may decrease by more than 15 percent.

Rick Sharga adds that the slowdown in home sales observed in the latter half of 2022 will persist into 2023. Listings are expected to linger on the market longer, approaching or exceeding 30 days.

Steady Home Prices:

While mortgage rates fluctuate, experts agree that hopeful buyers shouldn’t expect a significant drop in home prices. Evangelou asserts that prices will remain relatively flat, and overall home affordability won’t see dramatic changes. Even if there’s a slight dip in prices, it may not be enough to offset rising interest rates.

Housing Inventory Projections:

Experts differ on housing inventory projections for 2023. Sharga suggests that existing home inventory will likely remain low due to reluctance among current homeowners to trade in their low-rate mortgages. Conversely, others foresee a slight increase in supply as reluctant sellers join the market.

Buyer’s or Seller’s Market?

The market dynamics are expected to remain balanced in 2023. Affordability concerns and economic uncertainties will temper homebuyer demand, while limited inventory will persist. The leverage between buyers and sellers may vary by region, with larger markets potentially regaining pre-pandemic demand levels.

Conclusion:

In summary, 2023 is poised to be a transitional year for the housing market, characterized by uncertainty. While mortgage rates play a pivotal role, the hope is that inflation pressures ease, potentially leading to more favorable rates. As the market stabilizes, buyers may find more opportunities, but for now, patience is key.