Forecast: Home Market To Rebound With Lower Rates In 2023

While mortgage interest rates are still bouncing in the mid-6% range, top national economists believe the worst is over for financially squeezed home buyers, and normal housing market is on the horizon for 2023.

Mortgage rates will drop to 5.7% nationwide this year, giving home buyers a bit of relief after interest charges hit 7.08% on a 30-year fixed home loan in November of 2022, predicted Laurence Yun, chief economist of the National Association of Realtors.

The forecast for lower interest rates should return the housing market to normalcy, and create the kind of year that the market and realty industry desperately needs to lure home buyers off the fence, Yun believes.

However, on January 5th, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed home loan rates nationwide rose slightly to 6.48% from 6.42% a week earlier. A year ago, lenders were charging an average of 3.22% for 30-year fixed loans.

Additionally, on January 5th, lenders were charging an average of 5.73% on 15-year fixed mortgages, up from 5.68% a week earlier. A year ago, the 15-year fixed loan average was only 2.43%.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place a 20% down payment and have excellent credit.

“Mortgage application activity sunk to a quarter-century low last week as high mortgage rates continue to weaken the housing market,” said Sam Khater, Freddie Mac’s chief economist. “While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.”

Khater believes prospective home buyers are waiting for rates to decrease more significantly, and when they do, “a strong job market and a large demographic tailwind of Millennial renters” will provide support to the purchase market.

“Moreover, if rates continue to decline, borrowers who purchased in the last year will have opportunities to refinance into lower rates,” Khater said.

Other predictions from the NAR 2023 forecast follow:

• Thirty-year fixed mortgage rates will decline to 6% early this year. The drop is a signal that the Federal Reserve is likely to be less aggressive on interest rates because inflation is easing, Yun predicted.

• With interest rates easing, more upwardly mobile Millennials will make the leap from renting to homeownership.

• Apartment rents nationwide will increase 5% in 2023, on top of the 7% rent increase many tenants experienced in 2022.

Job growth continues

While the Federal Reserve is raising interest rates to combat inflation, companies are continuing to add jobs. In December of 2022, the unemployment rate fell from 3.6% to 3.5%, matching a 53-year low, reported the Labor Department. Average hourly wage growth was up 4.6% in December, compared with a year ago.

Employers added 4.5 million jobs in 2022, on top of 6.7 million in 2021. The increases were the biggest and second-biggest years of job gains since 1940.

First 2022 Tax Installment due April 3

Chicago and Cook County homeowners will have an extra month to pay the First installment of 2022 property tax bill this year, and their bills are already available online, noted Cook County Treasurer Maria Pappas. Visit: www.cookcountytreasurer.com.

Gov. J.B. Pritzker signed HB 5189 into law last month, making Monday, April 3, 2023, the new due date. First Installment bills usually are due on March 1st, and are equivalent to 55% of the previous year’s total amount.

For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.