It’s nearly 2023, which means it’s time for a fresh batch of mortgage and real estate predictions for the new year.
My assumption is everyone wants 2022 to come to an end as quickly as possible, as it hasn’t been kind to anyone.
Much higher mortgage rates have completely derailed the housing market, leading to lots of layoffs and closures across the industry.
And there remains a lot of uncertainty about what next year will bring, though I’m somewhat optimistic.
Read on to see what I think 2023 has in store for the housing market and the mortgage industry.
1. Mortgage rates will move lower in 2023
Let’s start with the elephant in the room; mortgage rates.
They’ve been the story of 2022, without question. Sadly, because they increased at an unprecedented clip and derailed the hot housing market’s decade-long bull run.
Of course, this was by design as the Fed believed the U.S. housing market was in bubble territory and unsustainable.
However, I believe interest rates overshot the mark and are due to see some relief in 2023.
The 30-year fixed has already fallen from its 2022-highs, and could continue to drop back in the 5% range and even the high-4% range.
So that’s something to look forward to. See my upcoming 2023 mortgage rate predictions for more details on that.
2. The housing market won’t crash in 2023
Related to lower mortgage rates is the health of the housing market. Ultimately, the housing market only really stalled because of much higher mortgage rates.
It’s not struggling due to questionable mortgage underwriting, dubious loan programs, or massive unemployment.
Ultimately, the Fed saw that demand for housing was too strong and took measures to address it.
If you remove the mortgage rate piece from the equation, we don’t have a big drop in home prices.
So if mortgage rates continue to improve, or even stay flat, home prices don’t plummet and there isn’t a housing crash in 2023.
At the same time, areas of the country that saw massive home price increases may be more susceptible to price declines.
The good news is home prices increased so much in the past couple years that even a 20% decline is just a paper loss for most homeowners.
In other words, your home is still worth way more than you bought it for, but perhaps not as much as it once was.