What to Expect
The 2022 housing market has been defined by two key things: inflation and rapidly rising mortgage rates. And, in many ways, it’s put the market into a reset position.
As the Federal Reserve made moves this year to try to lower inflation, mortgage rates more than doubled. This had a cascading impact on buyer activity, the balance between supply and demand and ultimately home prices. As a result, some buyers and sellers put their plans on hold and decided to wait until the market felt a bit more predictable.
So, what does that mean for next year? What everyone really wants is more stability in the market in 2023. For that to happen we will need to see the Fed bring inflation down even more and keep it there. Here’s what housing market experts say we can expect next year.
What’s Ahead for Mortgage Rates in 2023?
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 as we round out this year, we are 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 will land. But based on the average of their projections, a more predictable rate is likely ahead.
That means, we will start the year out about where we are right now. But we could see rates tick down if inflation continues to drop.
What Will Happen to Home Prices Next Year?
Home 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 this 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. 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, we can get a feel for what 2023 may hold.
The truth is probably somewhere in the middle. That means nationally, we will likely see relatively flat or neutral appreciation in 2023.