AN ARTICLE FROM BELL BANK MORTGAGE PRESIDENT:

Tony Weick

EVP/Bell Bank Mortgage President

WHAT'S AHEAD: 2023 Housing Market

At the start of 2022, the mortgage industry tide was beginning to turn after an extended run of hyperactivity. Little did anyone know the head winds were only going to become more severe

as the year continued. It didn’t take long to realize 2022 was going to be a year of change and reversal.

 

Interest Rates Rise at Historic Pace

We started 2022 with 30-year fixed rate mortgages in the

low 3% range – up slightly from historic lows. Due to economic factors, by mid-year, rates had risen at an historic pace, and by late fall, such rates reached the 7% range the highest level in more than 20 years (though still considered low when looking at extended history). This was a year of extreme volatility for the mortgage industry. Many economists say mortgage rates either peaked in late 2022 or will peak in early 2023 and then moderately decrease into 2024. Rates for 30-year fixed rate mortgages are expected in the high 5% range, continuing to trend lower throughout the year. As affordability has become a major challenge, a rate decrease would be a welcome trend.

 

Changes in Housing Inventory and Values

Over the past few years, there has been tremendous housing appreciation, with some increases in the double digits. With inflation, eroding consumer confidence and higher mortgage rates, appreciation levels have finally started to slow. Some markets that experienced the most significant increases are even starting to see home values decrease. Nationally, some level of home value depreciation is expected in 2023, ranging from smaller declines of 5% in much of the country to drops of 20% or more in markets with the greatest increases. While the number of homes for sale has slightly improved in most markets, we are not yet at a healthy, balanced level. This trend is expected to continue, but history shows it often takes years – not months – to catch up. Appreciation has most impacted lower priced homes, creating significant challenges for people with lower income and first-time homebuyers – an important segment of the housing market. Since home values and other changes typically are driven by local factors, we likely will see appreciation differences across the country.

 

Moving Forward

After experiencing a variety of headwinds in 2022 and the reality of some continuing into this year, the mortgage and real estate industries do see positive opportunities in 2023, partly due to:

• Expectations of rates beginning to decrease from the highest levels in two decades
• Consumer confidence in real estate becoming more positive as the industry becomes more balanced
• The slowing pace of housing appreciation
• Increasing inventory levels
• Program tweaks to make homeownership possible for more people

 

If you’re thinking about building or buying a new home, vacation home or investment property – or evaluating your current mortgage – I would appreciate the opportunity to help you determine what’s in your best interests. As always, we welcome your business and referrals and would be honored to serve you.