Median home selling prices peaked last summer, with prices moving generally lower in the months since. Fewer homeowners decided to sell in 2022, putting additional pressure on the market.
But neither was the most surprising turn of events.
“How quickly mortgage rates rose, and how high they went. It was really surprising,” said Jacob Channel, chief economist at LendingTree. “If you go back to the start of the year, people like me were saying ‘Oh, well, mortgage rates will rise to maybe 4% or 4.5%.’ So really, it is quite a bit more dramatic.”
Thirty-year rates topped 7% in October and have since settled back to around 6.4%.
What will happen to the housing market and the economy in 2023 is unclear, but Channel said there are some likely scenarios.
“For buyers especially, the good news is that prices will probably start to come down a little bit more notably this year … I think inflation is going to start coming down. Interest rates are probably going to stabilize. Generally, a lot of things might calm down a little bit,” he said.
Specifically, LendingTree’s forecast for 2023 sees 30-year mortgage rates averaging between 5.5% and 6.5% by the end of the year, with home prices falling between 5% and 10% nationally this year.
Other predictions include:
- The unemployment rate finishing 2023 by rising above 4%
- Year-over-year inflation falling to between 3% and 4% by year’s end; and
- The Federal Reserve’s benchmark Fed Funds target rate ending the year at around 5%
It also suggests sellers could face new challenges, with buyers gaining some more leverage in negotiating contracts and that the housing market will remain prohibitively expensive for many.
LendingTree’s 2023 economic outlook forecast is online.