2023 Mortgage Rates and Housing Market Predictions
Home purchase interest rates reversed course so quickly in 2022 that it left potential buyers feeling like they experienced a case of whiplash. On January 6, the average 30-year fixed mortgage was 3.22 percent according to Federal Reserve Economic Data (FRED). Not even a year later on November 9, the same rate was more than double, or 6.95 percent.
The rapid rise is attributed to The Fed’s aggressive actions to stem inflation, which included historic increases to the Fed Funds Rate. The Fed is set to stay its course as it battles negative economic forces, though the aggressive hikes we saw in 2022 are forecasted to abate over the next several months.
That’s the bad news. The good news, on the other hand, is that many predict that mortgage interest rates peaked in November of 2022. There has been a steady decline in the benchmark 30-year rate in the last few weeks, with the current status at 6.33 percent as of this post. That is a reduction of a quarter percent from 6.59 a week ago.
It is important to note, though, that the Fed does not set the amount you pay to borrow money, though their actions do have an impact. In the end, interest rates are set by market forces. While it is highly unlikely we will see the likes of three percent for new 30-year mortgages anytime soon, economic experts are predicting 2023 mortgage rates to fall somewhere between 5.5 and 6.5 percent by 2023’s end.
Correlations Between Interest, Home Sales and Prices
National Association of Realtors (NAR) Chief Economist Lawrence Yun predicts [the volume of] home sales to decline by 7 percent in for 2023. Even still, he estimates the national median home price will increase by 1 percent, with some markets experiencing price gains and others price declines. If his predictions hold true, there could be a strong rebound for housing in 2024, with a 10% jump in home sales and a 5% increase in the national median home price.
Even with all the tumult, Central Ohio is positioned to continue gains. Columbus prices are projected to grow 4.6 percent next year, says Realtor.com chief economist Danielle Hale. Her most recent report is projecting a “second wind” in buying activity in the second half of 2023. She expects mortgage rate hikes to continue through March, which will lead to less activity in the spring.
“This break could provide space for demand to renew as mortgage rates dip later in the year, when home shoppers will also have more options and bargaining power,” the report said.