2023 Guidance

How to Think About 2023

by Adam Duckwall

Volatility will likely permeate the 2023 real estate market. Mortgage rates play a major role in both home affordability and housing inventory. Because the underlying factors influencing interest rates are themselves volatile — e.g., bond prices, the strength of the economy, world events and crises, the Federal Reserve, and, of course, inflation, among others — interest rates will be difficult to predict. While Fannie Mae anticipates an average 30-year fixed rate of 6.8%, the Mortgage Bankers Association predicts only 5.2%. The variation in these predictions is night and day for buyer activity.

Lower rates translate to lower mortgage payments and increased affordability. Lower interest rates also increase the likelihood that current homeowners will make a move, thus increasing inventory. Mortgage interest rates change the supply and demand pressures of the housing market, and the volatility of 2023 rates may create waves through the real estate industry.

The National Association of Realtors predicts sales in 2023 will decrease 6.8% from 2022 levels. However, Zillow predicts midwest markets will be the healthiest in the country. Therefore, check your sources and make sure they are reliable and local.

For Buyers

During the pandemic market, it was difficult to be competitive as a buyer without Conventional financing. Since the market cooled, we have seen buyers purchase using FHA and DVA loans, which signals a re-opening of the housing market to many. If rates fall, affordability and supply will increase, as will demand. To avoid a competitive market with multiple offers and waived inspection contingencies, purchasing when rates are higher may be a better option.

For Sellers

Be cautious of making emotional decisions based on real estate news that may not apply to your situation. Make sure your strategy is data-driven and locally focused. Track mortgage rates to anticipate buyer activity. A significant drop in rates will create an influx of buyers and strengthen your position. Currently, inventory favors sellers. However, pricing should be competitive and avoid both over or underpricing. If you are selling and purchasing, strategize to weigh the benefits of sale timing vs. your needs as a buyer.

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