In 2022, we saw rising mortgage rates, lower inventory, and inflation. We knew there would be change, and the market would eventually correct itself, but mortgage rates more than doubled, and that has never happened over the course of one year.
All these things affected the housing market and had an impact on buyer activity, eventually bringing home prices down. Home sellers began to realize that the days of multiple offers over listing price were over and home sales prices were no longer what they were in 2020 and 2021.
Because of these unpredictable changes, both home sellers and buyers seemed to be putting their plans on hold and waiting to see when the market would balance itself and become more predictable.
What does this mean for 2023? Will the real estate market stabilize? What will happen with mortgage rates? Here is what experts are saying we can expect over the next year.
Mortgage Rates
Experts agree this year will be focused on inflation. We know that if inflation is high, that mortgage rates will also rise. If inflation falls, mortgage rates will likely follow suit. Housing economists are expecting a notable pull back in mortgage rates as inflation seems to be easing, which is good news.
For now, inflation is something to keep an eye on, and experts say we should expect mortgage rates to stabilize this year. As of December 28, 2022, the average rate on a 30-year loan stood at 6.74% according to Bankrate’s national survey of lenders.
It’s hard to predict what rates will be, but based on projections, rates may land between 5.5% and 6.5%. Greg McBride, CFA, Bankrate chief financial analyst, expects 30-year mortgage rates to drop to 5.25 percent by the end of 2023. Let’s hope he’s right!
Home Prices
Home prices are determined by supply and demand. We know that the more home buyers out there looking and the less homes on the market, the more home prices rise, just as we witnessed during the pandemic.
In 2022, things changed. Due to higher mortgage rates, we saw a decrease in active buyers, multiple offers over listing price, and list prices, but the weight of these numbers vary by region.
Although sellers are no longer in the position they were as in the previous two years, things still look good in Palm Beach County. In November, inventory continued to rise with the year-over-year supply of inventory reaching 3.3 months. The media home price also rose with an increase of 10.8% to $565,000.
Some experts are saying home prices will appreciate this year and others are saying home prices will come down. Most likely, they will land somewhere in the middle and balance out.
“Half of the country may experience small price gains, while the other half may see slight price declines,” says Lawrence Yun, chief economist at the National Association of Realtors (NAR).
What’s Next?
The 2023 housing market is still unknown but looking brighter. What we do know is that it will be determined by inflation and mortgage rates.
As I’ve said before, if you find a home that’s on the market, one that you can afford, and one that you love, don’t let the current mortgage rates prevent you from buying it. The house is long term, the interest rate is not. Plain and simple.
If you’re looking to buy or sell a home this year, let’s talk. We can discuss your financial situation, your family’s needs, and come up with the best plan to reach your real estate goals.