Blog

Interest rates in 2023

Mortgage Rates in 2023: Here’s the Predictions

24 Jan, 2023

As real estate professionals, we understand the impact high mortgage rates can have on the housing market—especially when home prices are still at record high numbers. With 2022 serving our industry some of the highest interest rates seen in over two decades, it’s no surprise we are looking towards 2023 with the hope for lower rates. Will that be the case?

According to Freddie Mac, the week ending January 19, 2023, the average mortgage rate was 6.15% down from 6.33%. While this is way better than the over 7% we saw in November, it’s not even close to the 2.5% our clients were enjoying before inflation hit. Is there a happy medium to be found, and if so, when? Many housing experts are predicting the rates to drop closer to the 5% range this year. However, this depends on a lot of factors.

When will rates drop again, and how?

Inflation and the state of the economy have a lot to do with when we can expect to see rates drop more. George Ratiu, Realtor.com’s director of economic research says, “We can expect financial market volatility to continue until investors have more clarity about the economy’s direction. With the Fed committed to monetary tightening until inflation is decidedly moving toward 2%, borrowing costs will remain elevated, keeping housing affordability at the top of the year’s list of challenges.”

Many experts also believe inflation has peaked, which is indicative of the Fed slowing their pace on the rate hikes. According to Usnews.com, “The Fed also began selling off mortgage-backed securities and Treasury bonds last year to reduce the size of its balance sheet, which put even more upward pressure on mortgage rates in 2022.”

For those of us who have been in this industry for decades, we have seen the rise and fall of interest rates—and how the market eventually balances back out. The COVID-era housing boom was a bit of an anomaly and got many buyers and sellers thinking this was the norm. However, reality has set back in, coupled with inflation and the winter market—causing a stall in the housing industry. The bottom-line is, the monthly inflation report, and state of the economy, will have the biggest impact on rate adjustments in 2023.

Zillow’s Senior Economist Orphe Divounguy states, “While there’s still a lot of work to do at the Fed, there’s a light at the end of the tunnel. At the end of 2023, beginning of 2024, we’re going to see a much better housing market, a housing market that looks more normal than we’ve seen in a long time.”

Navigating the housing market in 2023

As a real estate professional, it’s your job to help your clients understand how to purchase or sell a home no matter the circumstances at play. There’s always going to be someone who needs to sell or buy. Here are three areas to focus on with your clients this year:

  1. Attracting and educating clients:

Getting clients was super easy back in 2021! But with the changing economy, and housing demand, things are much different in 2023. Now’s the time to put strategy and creativity to work to attract clients.

You know your market better than anyone else. What areas are up-and-coming, which are the most-sought after? Target these areas and the people living in them. Give them reasons to trust you with their real estate needs, and educate them on the state of the market and the opportunities still available.

  1. Getting your on-the-fence clients off the fence:

We all have clients who waver from selling or buying at any given time. Now’s the time to reach out to them and share reasons why it makes sense to make a move now. Show them your latest stats. Have you had some great sales recently that ended with over asking price, multiple showings, and only a few days on the market? These types of real-life comparable examples may be all it takes to encourage them to finally make a move.

  1. Help your clients navigate the higher rates:

Because of the fear of inflation and higher mortgage rates, many of your prospects are too scared to make a move. This is where your understanding of the housing market comes into play. The rates may be higher, but many buyers are finding concessions to be much easier to achieve than two years ago when there was no wiggle room. Also, even though housing prices are still high, they are lower than what they were two years ago. Run the numbers for your prospects and show they that they may actually only be spending a couple hundred dollars more a month on their dream home than they would be before! Educate them on ways to improve their credit scores or down payment options and help them set up an actionable plan to meet their goals. Does this mean adjusting the budget or must-haves? Perhaps, but you can find them their dream home regardless of the rates.

According to Taylor Marr with Redfin, “Forty-two percent of Redfin deals were able to get concessions, like seller-paid rate buydowns (in the fourth quarter of 2022). They’re able to get that because of the additional bargaining power. There are some buyers that if they play the market right, they can find that good deal.”

No matter where 2023 takes the housing market and the mortgage rates, it’s important to stay informed and educate your clients on the best steps moving forward!

Velocity Title Moves Your Business Forward 

Velocity Title supports the real estate industry with a comprehensive line of title services that add value to each and every transaction. At Velocity Title, Our Personal Support Makes You Look Good Every Time! With a focus on the best CUSTOMER EXPERIENCE, Velocity Title incorporates leading title TECHNOLOGY and EXPERTISE into every transaction—enabling the final step in the home buying and investing process to be EASY, EFFICIENT and INFORMATIVE. For the perfect settlement experience every time, click here or contact us today!

ENTER YOUR EMAIL TO Download This Fed Slashed Interest Rates: Here’s What it Means for Real Estate

Error: Contact form not found.