What the Housing Market Will Look Like in 2023

Two key factors will define the 2022 housing market: inflation and rapidly rising mortgage rates. And, in many ways, it has reset the market.Mortgage rates more than doubled this year as the Federal Reserve (the Fed) took action to combat inflation, which has never happened in a calendar year. This had a knock-on effect on buyer activity, the supply-demand balance, and, ultimately, home prices. As a result of these changes, some buyers and sellers postponed their plans and decided to wait until the market felt more predictable.

But what does this mean for the coming year? What everyone really wants in 2023 is more market stability. That will require the Fed to reduce inflation even further and keep it there. Here's what housing market experts predict for next year.

What Will Mortgage Rates Look Like in 2023?

Moving forward, experts agree that it will all come down to inflation. Mortgage rates will rise if inflation remains high. However, if inflation continues to fall, mortgage rates will most likely rise. As the year comes to a close, there may be some early indications that inflation is slowing down, but things are far from certain. Inflation is still a concern in 2023. Experts are currently factoring all of this into their mortgage rate forecasts for next year. Experts predict that rates will stabilize slightly more in 2023 if these forecasts are averaged.

That means we'll start the year right where we are now. However, if inflation continues to fall, rates may be reduced. According to Greg McBride, Chief Financial Analyst at Bankrate:

“. . . mortgage rates could pull back meaningfully next year if inflation pressures ease.”

In the meantime, expect some volatility as interest rates fluctuate in the coming weeks. If inflation is brought under control, it will be good news for the housing market.

How Will Home Prices Change Next Year?

Supply and demand will always determine home prices. The more buyers there are and the fewer homes on the market, the higher home prices will rise. That's exactly what happened during the pandemic.

But things have changed this year. As a result of higher mortgage rates, we've seen home prices moderate and housing supply grow. The degree of moderation has varied by region, with the greatest shifts occurring in overheated markets. But, do experts believe this trend will continue?

The 2023 housing market is going to be defined by mortgage rates, and rates will be determined by what happens with inflation. The best way to keep a pulse on what experts are projecting for next year is to lean on a trusted real estate advisor.