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Mortgage Rates And Home Prices Are Expected To Keep Rising Next Year!

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Mortgage Rates And Home Prices Are Expected To Keep Rising Next Year!

According to the latest forecasts, home prices are not expected to get any lower in FY 2023. In the immediate aftermath of the pandemic, home prices skyrocketed because of increased demand and affordability due to low mortgage rates.

But because of uncertain market conditions, sellers were less reluctant about entering the market, and as a result, home prices either increased or remained in a steady state. Now, as the mortgage rates in 2023 are forecasted to be increased significantly, home prices may remain high.

Home Prices May Keep Rising Next Year

According to Realtor.com, the decrease in home prices may not happen as fast as people have expected, and they can expect the prices to steadily increase until mid-2023 and decrease or remain steady towards the end of the year. Altogether, 2023 may not be a good year for prospective buyers, as the prices may remain high more or less throughout the year.

Mortgage Rates And Home Prices Are Expected To Keep Rising Next Year!

The forecast is consistent with the current market trend, which remained the same for the last few years. Cities like Boise and Austin had seen high home prices along with increased mortgage rates in the year 2022. These unfavorable market conditions compelled many prospective buyers to abandon their plans of home purchase, and continue with renting instead. 

Of particular concern to those who wish to buy a home is the ever-increasing mortgage rates. The current mortgage rate is 6.74% (for a 30-year fixed), which is almost double that of the rate at the start of the year. For a 15-year fixed, the mortgage rate was 2.43% at the beginning of 2022, which increased to 6.07% towards the end of the year.

According to the forecasts from Realtor.com, the rates may even further increase in the year 2023 and could reach up to 7.4% by mid-year, and then starts declining slowly (around 7.1% towards the year-end). In major cities of California and Florida, home sales in 2023 are expected to decline by 14% to 28% based on specific market conditions, compared to that of the last few years. 

Here’s A Quick Summary Of The Key Forecasts From Realtor.com

  • 2023 may be a tough year for both the buyers and sellers due to high mortgage rates and the real estate market would become a “nobody’s-market”, according to Realtor.com
  • The mortgage rates are expected to remain high in 2023 (7.4% during the first half of the year, which might come down to 7.1%  by the end of the year) compared to a historic low in 2021 (3%).
  • For sellers, 2023 may not be a good year, and they shouldn’t have unrealistic expectations about the market. Home prices may grow a bit (5.4%) but at a slower rate.
  • The inventory of the housing sector might still lag the pre-pandemic situation, however, may be slightly up from the situation in 2022, which presents the buyers with more options to choose from, and slightly higher negotiating power to their advantage.
  • The current home sales may decline by an average of 15% in 2023, and the decline may go up to 28% in some cities. 

Conclusion

The affordability of the buyers, which depends on the income, mortgage rate, and home price, will continue to remain one of the strong search criteria which affect the buyer’s capability and decision to buy homes in 2023. Increased cross-market demand and shopping trends, where the buyers look for homes in places other than where they are currently located, may provide more flexibility for buyers in 2023, who are willing to relocate.

An increase in cross-market demand may also benefit the sellers by increasing the growth of home sales in small markets. However, the trend may simultaneously affect the market growth in metropolitan areas.

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