Decline In Mortgage Rates Seen By End Of 2023

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Decline In Mortgage Rates Seen By End Of 2023

Jan 16, 2023 | News | 0 comments

The November 2022 First American’s proprietary Potential Home Sales Model was released by First American Financial Corporation. Based on economic, demographic, and housing market fundamentals, what the healthy market level of home sales should be is measured by the Potential Home Sales Model.

Mark Fleming, the chief economist at First American, said that there will be a lot of influence from inflation on mortgage rates in 2023, which will determine the potential of the housing market. November 2022 saw a slight decline in mortgage rates, contributing to an increase in housing market potential of 2.5% over October 2022. Despite the modest increase in housing market potential, year-over-year potential existing-home sales remain 18 percent lower than they were one year ago, or 1,164,600 less than last year. Due to higher mortgage rates, both buyers and sellers are prevented from participating in the market, leading to a steep decline in market potential every year.

According to Fleming, as compared with one year ago, the median purchasing power for a home in November was $158,000 less – the second-greatest decline in over 25 years. Over the past year, mortgage rates have risen at an extraordinary rate, contributing to the decline in house-buying power. Mortgage rates for 30-year, fixed mortgages tripled between November 2021 and November 2018, reducing house-buying power by $170,000 assuming a constant income. Household incomes, however, have not remained static, but have risen, helping to prevent a greater loss of home ownership. Compared to a year ago, consumer purchasing power declined by 772,000 due to a significant rate decline.

It’s possible that mortgage rates will fall modestly in the latter half of 2023 if inflation decelerates toward the Fed’s target range. A stable and potentially modestly lower mortgage rate in 2023 will boost the housing market potential, despite mortgage rates remaining high compared to pandemic-era lows.