With mortgage rates high, home sales — and, in some areas, home prices — hitting the brakes, and increased uncertainty felt throughout the market, many homeowners, prospective sellers and hopeful buyers are feeling nervous.
And for good reason. As of May 31, the average 30-year fixed-mortgage rate stood at 6.9 percent. The Federal Reserve has raised rates for 10 meetings in a row in an effort to curb inflation. And sales of previously owned homes are down 23.2 percent since this time last year, according to the National Association of Realtors’ most recent existing-home sales report.
Industry experts have varying forecasts and projections about where mortgage rates, home prices, buyer competition, housing supply, sales activity and home affordability are headed over the course of the rest of the year. Curious what the pros think? Read on for their 2023 housing market predictions.
Will mortgage rates continue to climb?
Interest rates roughly doubled in 2022, and mortgage rates were no exception. But how about across 2023? Will the cost of financing a home be coming down this year?
Some say no — and in fact think rates will climb much higher. “Continued inflation, overall higher interest rates, a potential recession and geopolitical tensions will force 30-year and 15-year mortgage rates up throughout 2023, and will bring the two rates closer together as short-term risks rise,” says Dennis Shirshikov of real estate website Awning.com. He foresees the 30-year and 15-year benchmark mortgage loans averaging 8.75 percent and 8.25 percent, respectively, across 2023.
Robert Johnson, a professor of finance at Creighton University’s Heider College of Business, shares some of those sentiments. “By the end of 2023, financial market participants expect that the Fed will have increased the target Fed funds rate by 175 to 200 basis points from current levels,” Johnson says. “That would translate into 30-year and 15-year mortgage rates at roughly 8.50 and 7.70 percent.”
Some experts are more hopeful, though. Rick Sharga, founder and CEO of real estate consulting firm CJ Patrick Company, expects rates to peak at about 8 percent and 7.25 percent for 30-year and 15-year loans in early 2023, “then gradually come down over the course of the year somewhat, to hang in the range of 6.0 percent and 5.25 percent, respectively,” he says. Sharga does specify one caveat: “This is entirely dependent on the Federal Reserve’s ability to get inflation under control and ease up on its aggressive rate increases.”
Three possible scenarios
Nadia Evangelou, senior economist and director of real estate research for the National Association of Realtors (NAR), lays out three potential rate scenarios for 2023, depending on the Fed’s moves going forward:
- “In scenario 1, inflation continues to remain high, forcing the Fed to raise interest rates repeatedly,” she says. “That means mortgage rates will keep climbing, possibly near 8.5 percent.”
- “In scenario 2, the Consumer Price Index responds more to the Fed’s rate hikes, and there is a gradual deceleration of inflation, causing mortgage rates to stabilize near 7 percent to 7.5 percent for 2023.”
- “Or, in scenario 3, the Fed raises rates repeatedly to curb inflation and the economy falls into a recession. This could cause rates to likely drop to 5 percent,” she says.
Will housing sales decline?
Each of Evangelou’s three scenarios would have a major impact on home sales. In each case, sales will be down — it’s just a question of how much. “Higher rates under scenario 1 could cause home sales to drop by more than 10 percent next year,” she says. “In scenario 2, home sales drop by 7 percent to 8 percent. And in the third, home activity may drop further, by more than 15 percent.”
Sharga agrees that the slowdown in home sales that beset the second half of 2022 will continue into 2023. In addition, he says, listings will sit on the market for a longer time before selling. “Days on the market have been climbing back toward more normal levels recently, and we could see them approach 30 days or more in 2023 as the market continues to cool down,” he says.
The national average days on market as of April was 22, according to NAR data, which was an improvement over the previous two months but an increase from this time last year, which was just 17 days. “The average days on the market will increase somewhere between two and three times the current levels,” Shirshikov predicts.
Will home prices go down?
Will homes continue to remain financially out of reach for many purchasers next year? Experts say hopeful buyers should not expect today’s high prices to plummet anytime soon. “Home prices won’t drop in 2023,” Evangelou says. “I expect pricing to be relatively flat.”
Prices will remain fairly steady — and in a lot of markets, that’s a price that is 40 percent or more higher than pre-pandemic.
— Greg McBride, Bankrate Chief Financial Analyst
“If inflation pressures ease and we see a meaningful pullback in mortgage rates, this will ease some of the strain on buyers — but only a bit,” McBride says.
“Overall home affordability won’t change dramatically,” Johnson agrees.
“Home prices will not fall proportionally,” Shirshikov says. “Any fall in prices will not be enough to offset the rising interest rate and its contribution to the monthly [mortgage] payment.”
Even slightly lower prices would still be welcome news for house-hunters, though. “There are plenty of potential buyers still patiently waiting to enter the market,” says Scott Krinsky, a partner in the residential banking department with Manhattan law firm Romer Debbas. “Assuming home prices ease, you’ll start to see some of these buyers emerge.”
Will housing inventory increase?
A shortage of available homes helped fuel the frenzied market of the last few years. But experts differ on housing inventory projections for 2023.
“Before the housing crash of 2008, inventory peaked at about a 13-month supply — twice what we would see in a healthy market,” Sharga says. “Today, we have about a three-month supply, which is about half of what we need. Current homeowners are unlikely to trade in their 3 percent mortgage for a new home with a 7 percent loan unless they absolutely have to, so existing home inventory should remain low. And we are not likely to see a huge boost in supply from new construction anytime soon, either.”
Others foresee increased supply, at least slightly. “Many reluctant sellers — those waiting for the market to turn around — will likely capitulate [this year], adding to more housing supply,” Johnson says.
“Housing inventory will rise throughout 2023 as homes become more unaffordable due to high rates,” adds Shirshikov.
Will 2023 be a buyer’s market or a seller’s market?
For around two years, it was a clear seller’s market. But lately, buyers have been gaining back some leverage in many markets. So will the rest of 2023 favor buyers or sellers more?
“Affordability issues and economic worries will depress home buyer demand, and inventory of homes available for sale will remain limited,” says McBride. “So it’ll continue to be more of a balanced market than tilting one way or the other.”
Krinsky expects leverage to vary nationally, depending on the type of market. “With the pandemic, we saw a new spike of bidding wars in suburban and smaller markets, likely because of the desire for more space and the increased flexibility of remote working across the country,” he says. “Now that many offices and businesses are back near full capacity, the hope is that larger markets can revert back toward pre-pandemic levels and we will see increased demand there.”
Bottom line on the 2023 housing market
Most experts are in consensus that, in the big picture, 2023 will be something of a transitional year, characterized by uncertainty.
“The housing market will be tepid in 2023, with only lukewarm demand and a limited amount of inventory available for sale,” McBride predicts. However, “mortgage rates could pull back meaningfully if inflation pressures ease.”
“The hope is that, as supply and demand within the housing market normalizes, interest rates can start to come back down to earth,” Krinsky says. “Until this happens, those who simply cannot afford the costs of borrowed money will have to continue to wait.”
But if mortgage rates don’t move much, “borrowers will pursue fewer purchase loans and we will see a continuing decline in rate-based refinance activity,” Sharga points out. “With more homeowners staying in place, we also might see an uptick in home equity loans and home equity lines of credit over the course of the year.” If moving is out in 2023, remodeling may well be in.
FAQs
“Continued inflation, overall higher interest rates, a potential recession and geopolitical tensions will force 30-year and 15-year mortgage rates up throughout 2023, and will bring the two rates closer together as short-term risks rise,” says Dennis Shirshikov of real estate website Awning.com.
What are the real estate challenges in 2023? ›
Top 10 Issues Affecting Real Estate 2022-2023
- Inflation and Interest Rates.
- Geopolitical Risk.
- Hybrid Work.
- Supply Chain Disruption.
- Energy.
- Labor Shortage Strain.
- The Great Housing Imbalance.
- Regulatory Uncertainty.
In my opinion, real estate is one intelligent option to consider in 2023, as it often has excellent returns, tax advantages and provides diversification even in the face of a challenging economic climate. Real estate also has the potential to compound your investment.
Will mortgage rates go down in 2024? ›
Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point. Figures are the predicted quarterly average rates for the 30-year fixed-rate mortgage.
Will 2023 be a good time to buy a house? ›
Homebuyer.com data analysis indicates that, for first-time home buyers, June 2023 is a good time to buy a house relative to later in the year. This article provides an unbiased look at current mortgage rates, housing market conditions, and market sentiment.
Is the US headed for a housing crisis in 2023? ›
It's also worth noting that while foreclosure rates are up year-over-year, experts do not expect to see a wave of foreclosures in 2023, even where home values are depreciating, as many homeowners have substantial equity due to progressive home price appreciation in recent years.
Why buying real estate in 2023 could be a good idea? ›
Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.
What is the legal term for property? ›
property. n. anything that is owned by a person or entity. Property is divided into two types: "real property," which is any interest in land, real estate, growing plants or the improvements on it, and "personal property" (sometimes called "personalty"), which is everything else.
What is the cost of capital in real estate? ›
The cost of capital is used for project evaluation purposes. Under the net present value method, the cost of capital is used as the discount rate to calculate the present value of future cash inflows derived from the real estate project.
How to make money in real estate in 2023? ›
- House Flipping. Fix and flips are one of the most popular methods of making money in the real estate market. ...
- Rental Properties. Another way to invest in real estate is to buy property directly. ...
- House Hacking. ...
- Real Estate Investment Trusts (REITs) ...
- Online Real Estate Crowdfunding Platforms.
Is House Flipping Profitable in 2023? Yes! If you get the basics right, flipping homes in California is easier in 2023 than flipping homes in 2021's competitive market. You Make Money When You Buy Your Flip: Stick to the home flipper's 70% rule.
How high will mortgage interest rates go in 2023? ›
“[W]ith the rate of inflation decelerating rates should gently decline over the course of 2023.” Fannie Mae. 30-year fixed rate mortgage will average 6.4% for Q2 2023, according to the May Housing Forecast. National Association of Realtors (NAR).
What will 30-year mortgage rates be in 2023? ›
McBride expects rates to fall more consistently as the year progresses. "Thirty-year fixed mortgage rates will end the year near 5.25%," he predicts.
How low will mortgage rates drop in 2023? ›
“We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It since has walked back its forecast slightly but still sees rates dipping below 6%, to 5.6%, by the end of the year.
Will interest rates go down in 2023? ›
Along those lines, organizations like Fannie Mae and the Mortgage Bankers Association forecast that the average rate on 30-year fixed-rate mortgages will decline throughout 2023, continuing into the first quarter of 2024.
What will interest rates be in 2023? ›
Mortgage rate predictions for 2023
| Housing Authority | 30-Year Mortgage Rate Forecast (Q2 2023) |
|---|
| National Association of Home Builders | 6.36% |
| Fannie Mae | 6.40% |
| Mortgage Bankers Association | 6.40% |
| Average Prediction | 6.35% |
2 more rows6 days ago
Property includes not only money and other tangible things of value, but also any intangible right considered as a source or element of income or wealth. This also includes the right and interest of which a person holds in lands and chattels to the exclusion of others.
What are three types of property defined by law? ›
Property law in the United States is complex and multifaceted, but these laws pertain specifically to three distinct types of property. Both state and federal laws exist to protect real property, personal property, and intellectual property.
What is the black law definition of personal property? ›
Aside from vegetables, personal property is defined as “the belongings of an individual, excluding any real estate property or other buildings,” according to Black's Law. This is a large category, so the law obligingly provides subcategories, consisting of tangible (or “chattel”) and intangibles.
How do you calculate if a property is a good investment? ›
The 1% rule of real estate investing measures the price of the investment property against the gross income it will generate. For a potential investment to pass the 1% rule, its monthly rent must be equal to or no less than 1% of the purchase price.
You can determine home value by using an online valuation tool, hiring an appraiser, using a real estate agent, or checking comparable homes in your area. Using an online valuation tool or pulling comps in your neighborhood is easy and quick, but you'll receive more accurate results using a REALTOR® or appraiser.
What is value in use appraisal? ›
Value in Use: “The value of a property assuming a specific use, which may or may not be the property's Highest and Best Use, on the effective date of the appraisal. Value in Use may or may not be equal to Market Value, but is different conceptually”. (The Dictionary of Real Estate Appraisal, 6th Edition).
What is the best way to get rich in 2023? ›
- Earn more. I think one of the first steps for building wealth is to earn as much as possible for a while. ...
- Watch your student debt. There are different approaches to debt, but I tend to agree that there's good debt and bad debt. ...
- Separate time from money. ...
- Buy assets. ...
- Build assets. ...
- Start saving for retirement. ...
- Educate yourself.
There is no quick way to make money or get rich in real estate, but you can grow wealth gradually and consistently by investing correctly. You are probably aware that there are numerous ways to accumulate wealth, but real estate is one of the most effective.
How to invest 150k in real estate? ›
Where To Invest $150k In Today's Real Estate Market
- Wholesaling properties.
- Fixing and flipping homes.
- Buying and holding rental properties.
- Investing in mortgage debt.
- Private money lending to other investors.
- Stocks, REITs and partnerships.
The 70% rule can help flippers when they're scouring real estate listings for potential investment opportunities. Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home.
What is the best state to flip a house? ›
Utah and Missouri establish themselves as the best places to flip houses in terms of low remodeling costs. New Jersey, meanwhile, has the lowest rental vacancy rate. West Virginia boasts the highest homeownership rate in the US and the lowest housing costs.
Should I buy a house that is being flipped? ›
It's not always a bad deal: Flipped houses are often move-in ready, come with modern amenities and could save you money over doing the upgrades yourself. But if you buy a bad flip, you could be on the line for costly repairs.
How long will interest rates stay high? ›
'I believe by the end of 2023 we will see rates start to fall with a target of between 2.5 to 3 per cent in 2024. 'I believe if the base rate can get back to circa 2.5 per cent, then we will see rates hovering around that mark with a return to products that have not been seen in the mortgage industry for some time.'
What is the mortgage rate forecast for the next 5 years? ›
The predictions made by the various analysts and banks provide insight into what the financial markets anticipate for interest rates over the next few years. Based on recent data, Trading Economics predicts a rise to 5% in 2023 before falling back down to 4.25% in 2024 and 3.25% in 2025.
“Returning to mortgage rates of 3% or 4% is not going to happen, in my view,” says Yun, who points out that historically rates have been higher. The low rates of 2020 and 2021 were “unique” and those that got them were “lucky,” he says.
What will mortgage interest rates be in 2023 2024? ›
The Fed penciled in a 5-5.25 percent peak interest rate for 2023, after which officials see rates falling to 4.25-4.5 percent by the end of 2024.
What are mortgage rates for 2023 and 2024? ›
Fannie Mae expects the 30-year fixed to ease to around 6.1% in the second quarter of 2023, before falling to 5.9% in the third quarter and 5.7% in Q4. And it gets even better than that. By the end of 2024, they expect the 30-year fixed to average 5.2%.
Will mortgage rates go down in july 2023? ›
Mortgage Rate Predictions 2023
Mortgage experts see rates decreasing over the coming months as the economy slows. Lawrence Yun, the chief economist of the National Association of Realtors, said he expects rates to fall to 5.5 percent by mid-2023.
What do top economists predict for 2023? ›
In 2023, economic activity is projected to stagnate, with rising unemployment and falling inflation. Interest rates are projected to remain high initially and then gradually decrease in the next few years as inflation continues to slow.
Are most economists predicting a recession in 2023? ›
A majority of economists forecast a recession for the U.S. in 2023 – 58 percent, according to a survey from the National Association for Business Economics (NABE) released earlier this week on March 27.
What is the latest economic forecast for 2023? ›
Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023. In a plausible alternative scenario with further financial sector stress, global growth declines to about 2.5 percent in 2023 with advanced economy growth falling below 1 percent.
What is the economic and market outlook for 2023? ›
Economic growth is expected to slow this year
GDP growth is expected to slow to around 1¼ per cent over 2023, with GDP per capita declining over the year (Graph 5.4). The weaker near-term outlook relative to three months ago reflects the softness in recent activity data.
What will 2023 recession look like? ›
Many economists believe the strategy will trigger a recession this year. But the NABE forecasters expect the economy to grow 0.8% in 2023 – based on the change in average GDP over the four quarters compared with 2022. That is down from 2.1% last year but up from their 0.5% estimate in December.
How to prepare for 2023 recession? ›
Here are some things you can do to protect your finances from the worst effects of a recession:
- Start socking away cash in an emergency fund. ...
- Pay down your debts. ...
- Increase your credit limits or apply for a home equity loan (just in case). ...
- Make an appointment with your financial advisor. ...
- Hold tight but stay informed.
We forecast real GDP growth of 0.9% in 2023 and 0.8% in 2024, and headline CPI inflation of 4.0% and 2.8%, respectively. With ongoing credit tightening and a broad-based slowdown, we look for the Fed to lift its policy rate once more in May to a range of 5.00-5.25% before a pause into 2024.
How severe will the 2023 recession be? ›
A deep recession would mean a steep drawdown in stock prices in 2023, these analysts said. By Siddiqui's calculations, the S&P 500 — which currently sits at 4,079 — could hit 3,000 this year. Rosenberg predicts 2,900. That would mean a loss of 26% to 29%.
Is there a 70 chance for a US recession in 2023? ›
Odds of a recession in 2023 hover at 64% amid bank failures and higher rates. Economists see jump in unemployment and major job losses over next 12 months.
Will 2023 be a bad year for the economy? ›
There is broad consensus that the U.S. is likely to see an economic slowdown in Q1 2023 as the impacts of the Federal rate rises from late 2022 start to feed into the economy; however, there is a significant divergence with regards to the quarters that follow.
What is causing inflation 2023? ›
Higher Prices for Services Are Now Driving Inflation
A stacked bar chart showing the contributions of each of the following categories to the overall inflation rate from 2018 to March 2023: food, goods, services and energy. Services have now overtaken goods as the primary contributor to inflation.
Are interest rates rising in 2023? ›
Fed forecasts show one more rate hike could be possible for 2023, likely at the May 3 meeting. But Federal Reserve Chair Jerome Powell emphasized they “may” hike rates one more time, suggesting that increase might not happen. So far in 2023, the Fed raised rates 0.25 percentage points twice.
What are the economic predictions for 2024? ›
Annual GDP growth in the United States is projected at 1.5% in 2023 and 0.9% in 2024 as monetary policy moderates demand pressures. In the euro area, growth is projected to be 0.8% in 2023, but pick up to 1.5% in 2024 as the drag on incomes from high energy prices recedes.
How much will the market drop in 2023? ›
Tepid Earnings
Publicly traded companies continue to see a slide in revenues in the second quarter of 2023. The larger question is how long it will take for earnings to recover. FactSet Research Systems estimates that S&P 500 second-quarter earnings will decline by 6.3%, and revenue will fall by 0.4%.
What are the top economic concerns for 2023? ›
5 economic challenges that await us in 2023
- An imminent recession. ...
- Stubborn inflation. ...
- China's COVID chaos. ...
- An energy crisis. ...
- Geopolitical tensions, technology war.
The IMF on Tuesday lowered its growth projection for 2023-24 to 5.9 per cent from 6.1 per cent earlier but despite a significant drop, India continues to be the fastest-growing major economy in the world, the World Economic Outlook figures revealed.
