Last year was a wild ride for the housing market as mortgage rates doubled and home sales dropped. These changes pushed a lot of people out of the market. Last year, the Federal Reserve hiked its benchmark interest rate at a record rate to slow the economy and fight high inflation rates. While many things were affected, the housing market was one of the biggest.
You’re probably wondering what’s in store for 2023. Will housing prices stay the same? Will interest rates come down? Let’s see what the experts are predicting the housing market to look like this year.
Less Buyer Demand
Most analysts say that 2023 will have less buyer demand due to rate increases and a shortage of availability. For these buyers, it makes sense to wait. A lot of people are also going to stay put in their homes because they’re not willing to trade in their low interest rate with something much higher. Many homeowners are still sitting with interest rates as low as 2 and 3 percent.
Of course, even in a slow market people move because they want to or have to. Retirees may be ready to downsize, while a growing family may want to upsize. There are also people relocating for jobs or moving closer to family. However, for people who don’t have to move, high interest rates and low housing inventory are likely to deter them from trying.
Lower House Prices
Many experts are predicting lowered house prices simply because the market isn’t as hot as it was. And, with higher interest rates, home prices have to come down so that people can afford the payments. Otherwise, more potential buyers will wait because they can’t afford high housing prices and high interest rates.
Here in Southern Nevada, home prices continue to fall. According to Redfin data, the median sale price for a Las Vegas home was $375,000 in December 2022, down from $432,000 in June 2022. But even though prices are dropping, analysts knew that the previous market was not sustainable.
Higher Borrowing Rates
Some good news on the horizon: the mortgage interest rate forecast for February 2023 is for rates to continue to decline. 30-year mortgage rates are inching closer to 6 percent and may even drop down to 5 percent. With reduced house prices, these changes will hopefully entice people to re-enter the housing market.
However, it’s important to keep realistic expectations when it comes to interest rates. We’ve been spoiled by low rates of 2 and 3 percent, but these numbers are also not sustainable. As this article points out, the projected dip in mortgage rats won’t be anything like the pre-pandemic lows. Historically, the long-term average interest rate is just under 8 percent, so a 5 or 6 percent interest rate is still great.
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