What’s Ahead for Mortgage Rates and Home Prices?

You might be wondering what the future holds for mortgage rates and home prices as you prepare to sell your home and move. Here are some expert predictions on where both may go so you can make the best decision possible.

Mortgage Rates Will Continue To Respond to Inflation

There is no denying that in 2022, mortgage rates surged as a result of the market's reaction to excessive inflation. The rises we observed were quick and abrupt; in the fall, the typical 30-year fixed mortgage rate even exceeded 7%. It was the first time in more than 20 years that they had risen so high.

Freddie Mac shows in their quarterly report just how quickly rates have risen:

“Just one year ago, rates were under 3%. This means that while mortgage rates are not as high as they were in the 80’s, they have more than doubled in the past year. Mortgage rates have never doubled in a year before.”

It's difficult to predict with accuracy where mortgage rates will go from here because we're in uncharted terrain. Although predicting mortgage rates for the future is far from a precise science, experts do concur that rates will continue to respond to inflation in the future. And mortgage rates will probably decrease if inflation does too.

Home Price Changes Will Vary by Market

Home prices have softened in many cities as well as consumer demand has decreased in reaction to those rising mortgage rates. In terms of the prediction for 2023, some experts predict a minor increase in prices while others predict a slight decrease in prices (see graph below). To obtain the complete picture, the best way to look at it is to average all of the expert predictions. When we do so, the national appreciation forecast for 2023 is essentially neutral or flat.

Future housing price increases will differ by the local market, with more significant shifts occurring in hotter regions. Everything is dependent on other elements operating in that regional market, such as the equilibrium of supply and demand. According to First American's Chief Economist Mark Fleming:

“House price appreciation has slowed in all 50 markets we track, but the deceleration is generally more dramatic in areas that experienced the strongest peak appreciation rates.”

Bottom Line

If you want to know what’s happening with home prices or mortgage rates, let’s connect so you have the latest on what experts are saying and what that means for our area.