What To Expect From the Housing Market in 2023

The 2022 housing market will be determined by two key factors:

Inflation and rapidly rising mortgage rates. In many ways it put the market in a reset position.Mortgage rates have more than doubled this year as the Federal Reserve (Fed) took steps to keep inflation down this year. This had cascading effects on buyer activity, supply and demand balance, and ultimately home prices, And with all of this changing, some buyers and sellers have decided to put their plans on hold and wait until the market becomes a little more predictable. But what does that mean for next year? What everyone really wants is more market stability in 2023. To do that, the Fed will have to lower inflation further and keep it there. Here’s what housing market experts say we can expect next year.

What’s Ahead for Mortgage Rates in 2023?

Experts agree that the future is still just inflation. Higher inflation means higher mortgage interest rates. But if inflation continues to fall, mortgage rates are likely to react. There may be early signs that inflation will begin to ease towards the end of the year, but we are not out of the woods just yet. Inflation is also something to watch in 2023. Experts are now factoring all of this into their mortgage rate forecasts for next year. And when these projections are added up, experts say we can expect rates to be a little more stable in 2023. Whether it’s between 5.5% and 6.5%, it’s hard for experts to say exactly where they’re going to end up. There may be (see chart below):

So that means we’re starting with the year we’re in. However, if inflation continues to fall, interest rates could fall. Bankrate Chief His Financial His Analyst Greg McBride explains:

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

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.

What Will Happen to Home Prices Next Year?

Real estate prices are always determined by supply and demand. With more buyers and fewer homes on the market, property prices will rise. And that’s exactly what we saw during the pandemic.

But this year things have changed. Home prices are benign and home supply is increasing as rising mortgage rates have dampened buyer demand. The degree of easing varied across regions, with the biggest changes seen in overheated markets. But do the experts think it will stay that way?

The chart below shows the latest house price projections for 2023. Some experts say house prices will rise next year, while others say they will fall, as indicated by the different colored bars. But again, if we average all the predictions (shown in green), we can see what 2023 will bring.

The truth is probably somewhere in between. This means that 2023 is likely to see a relatively flat or neutral rise nationwide. Lawrence Yun, chief economist for the National Association of Realtors (NAR), said:

“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.”

Bottom Line

The 2023 housing market will be defined by mortgage rates, which are determined by inflation. The best way to keep up with expert predictions for the coming year is to rely on a trusted real estate advisor. Let’s connect. Find out why Kaya Homes is the leader in Long Island Real Estate and are your go-to realtor in the Lynbrook, Oceanside, Malverne, Hewlett, Valley Stream, East Rockaway, Woodmere, Cedarhurst, Baldwin, North Woodmere, Woodsburgh, Hewlett Neck Hewlett Harbor, Bellmore,Wantagh,Merrick and Freeport area.