What Mortgage Professionals Can Expect This Year
The past year served as the tail end of a COVID-induced housing spike, with 2023 ushering in a new era. Gone are the times of record-low interest rates and ever-intensifying bidding wars. This year will look just a little bit different.
Industry experts are already weighing in on the 2023 housing market, and a few key trends have started to take shape. Whether your clients are looking to buy, sell, or simply make sense of the market, here’s what the new year is expected to usher in:
Stabilizing Home Prices
Sky-high and still climbing home prices have characterized the housing market for the past few years. The good news is that we may finally see the pace slowing in 2023.
While prices may not drop, dramatically or otherwise, they should fall a bit flatter throughout the year.
This is particularly good news for any first-time buyers you may be taking on as clients. This could be the year to finally achieve homeownership, as buyers may once again have a fighting chance.
If you’re working with sellers, on the other hand, you may need to encourage them to adjust their expectations a bit. The days of receiving multiple offers far above the asking price are likely largely in the past. Sellers should strongly consider this phenomenon, especially if factoring any profit into a down payment on another property or other large-scale purchase.
Stabilizing Interest Rates
While interest rates doubled in 2022, they are expected to plateau in the coming year.
Essentially, interest rates are still expected to rise overall, but not nearly as dramatically. Projected rates range from 8.0%-8.75% for 30-year rates and 7.7%-8.25% for 15-year rates.
Some optimistic experts expect to see slight dips in interest rates, particularly toward the end of 2023, but this will largely depend on inflation.
Amid fluctuating rates over the past few years, it’s critical to educate current and potential clients on historical mortgage rate trends. For example, while today’s rates may be higher than those in 2021 and 2022, they are still lower than average, and certainly lower than those of the 80s.
This year, be sure to explain how and why mortgage rates are set, what current rates mean for the individual client, and what impact waiting to buy, sell, or refinance might have on their situation.
The high demand seen these past few years was also due in part to severely limited supply. Unfortunately, as we move into 2023, things are not looking much better.
Many new homeowners are now essentially locked into their mortgages, as they received such favorable interest rates. This means that fewer owners will be moved to sell this year. In fact, Redfin projects approximately 4.3 million home sales for the year, a 16% decrease year-over-year.
In the same vein, late 2022 was characterized by low homebuilder sentiment. Supply chain issues, labor challenges, and fluctuating prices put stress on new construction projects.
Essentially, if you’re working with first-time buyers, be upfront and open about supply issues. Market-specific data will add a relevant and personal touch.
The Bottom Line
While no one can predict the future with absolute certainty, and there are clearly still some challenges on the horizon, it appears that some of the more turbulent aspects of the recent industry could soon balance out. Between stabilizing prices and more consistent home interest rates, MLOs may be able to help offset some of the market’s current stressors, like diminished supply by discussing unique home loan solutions for different property types with borrowers.
The bottom line is, whether your clients are kicking off 2023 as hopeful buyers, eager sellers, or interested observers, this year’s housing market is sure to be one for the books!
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