With the housing market ‘fizzled out,’ 2023 is off to the worst start in decades — but here’s why analysts are dreaming of a mild spring – Yahoo Finance
With the housing market ‘fizzled out,’ 2023 is off to the worst start in decades — but here’s why analysts are dreaming of a mild spring
Homebuyers hoping for a better climate in 2023 have longer to wait, as they now face the highest mortgage rates to start a new year since 2002.
However, analysts remain hopeful that today’s volatile rates will stabilize in the coming months.
“While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023,” says Sam Khater, Freddie Mac’s chief economist.
“Homebuyers 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.”
30-year fixed-rate mortgages
The average 30-year fixed-rate is 6.48%, up from last week when the average rate was 6.42%, Freddie Mac reported Thursday.
This time a year ago, the average rate was just 3.22%.
“Although rates are more than double a year ago, rates will likely stabilize below 6% in 2023 as inflation will continue to slow down in the following months,” says Nadia Evangelou, senior economist for the National Association of Realtors.
She acknowledges that only a fraction of potential buyers will be able to afford a home if these conditions linger.
“With the qualifying income near the $100,000 threshold, 32% of all households and 15% of all renters can currently afford to buy the median-priced home.”
15-year fixed-rate mortgages
The average 15-year fixed rate moved up to 5.73%, compared to the previous week’s rate of 5.68%.
This time last year, it was 2.43%.
“Capital markets are reacting to the uncertainty brought about by the dichotomy between mounting recession expectations and incoming economic data which show continued resilience,” writes George Ratiu, manager of economic research at Realtor.com.
“Real estate markets are firmly in the winter season, with high prices and rates creating a barrier for many buyers on the road to homeownership.”
Ratiu points out that the buyer of a median-priced home today could be facing a monthly payment that’s 64% higher than last year.
“We may have to wait until the start of the spring shopping season for more clarity on the direction of housing markets this year, especially as both buyers and sellers are pulling back from the marketplace.”
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