Wishing all our Readers are Very Happy & a Prosperous New Year.
How do we see the 2023 Housing market?
1. Mortgage rates are likely to pull back:
The increasing trend of mortgage rates after reaching its peak in early November is expected to gradually edge lower and stabilize, with rates going as low as 6% over the year. The mortgage rates are expected to fall since inflation is expected to recede and U.S. Economy is preparing for a modest recession.
Money.com mentions Lawrence Yun, chief economist at NAR, for example, who thinks the 30-year mortgage rate will end in 2023 at around 5.5%.
The home purchase became less affordable last year because of high home prices later combined with high mortgage rates. Any improvement in rates can bring the homebuyers who were priced out back to the table. However, expecting mortgage rates to go back to 3% looks overtly ambitious.
2. Inventory to remain tight:
Next year inventory is expected to see better days, however, it will still be below demand levels. We are seeing a better balance in the demand-supply rates because homes aren’t selling as fast since there is a temporary pullback in demand and sellers were bringing in new listings, which kept bridging the gap. Once the borrowing conditions soften and the market normalizes there will again be a gap in supply and demand. Even if the inventory adds in, there will still be undersupply.
3. Home Prices will Level Off:
The market needs a correction to reach a healthier balance between sellers and buyers, as well as for a healthier affordability. As per experts, the correction may vary from single digit to double digit even an increase of single digit is a possibility. However, one certainty is there won’t be the double-digit price increases that have been the hallmark of the pre-pandemic market. Shortage in inventory will keep home prices from falling too far.