Weren't Mortgage Rates Supposed to Fall in 2023?

Weren't Mortgage Rates Supposed to Fall in 2023?

Weren't Mortgage Rates Supposed to Fall in 2023?

What happened?

What’s the deal with interest rates?!

Unfortunately, that’s not the beginning of a Jerry Seinfeld bit. Interest rates have remained stubbornly high, even though industry experts predicted they would decline in 2023. 

Here’s what you need to know about where rates are headed, and how it will affect the housing market and your home buying and selling decisions.

Average rates for a 30-year fixed-rate mortgage are now ~7.5%, levels not seen since 2000. After record low rates during the pandemic, the increases since have been a shock to the system for buyers and sellers alike, and have slowed the housing market significantly.

Mortgage rates over the past year:

How did this happen? It’s all thanks to an unexpectedly strong economy, low unemployment, and world wide inflation levels not seen since the early 1980s.
In an effort to bring inflation back down to a healthy 2% annual growth, the Fed raised its federal funds rate seven times in 2022, and four times 2023. They’re expected to do so once more in 2023, unless we see an economic slowdown before then.

Have mortgage rates finally peaked?

NAR chief economist Lawrence Yun seems to think so: “With consumer price inflation coming close to the Federal Reserve’s desired conditions, mortgage rates look to have topped out.”
Industry groups revised their projections after rates remained unexpectedly high through the first three quarters of 2023. But they still predict they will finally start to decline in Q4 2023, and into 2024.

How does this affect me?

Two-thirds of prospective homebuyers are waiting on the sidelines for rates to fall before buying a home. This will cause a surge in demand when rates do finally decline.
Yun also forewarned that “any meaningful decline in mortgage rates could lead to a rush of buyers later in the year and into the next.” Keeping Current Matter predicts that for every 1% decline in interest rates, ~5 million new buyers will enter the market.

Higher interest rates might just be your new best friend.

The best way to avoid these heightened levels of buyer competition is simply to start looking now, while rates are higher and competition is lower.
By looking now, while rates are higher, you’ll get a better price and better terms, especially during the holiday months, when demand is historically lower, and sellers are historically more motivated.

Home Shopping for the Holidays

The holiday season is an optimal time to conduct your home search because not only are mortgage rates projected to pull back somewhat (see graph above), but also home prices are historically lower during the holiday months.
“The fall and winter months could bring better values and a less competitive environment to find the right home,” George Ratiu, chief economist at Keeping Current Matters, says.

The best months to buy a home ranked:

Are you ready to buy or sell a home in LA and beyond? I would love to help, and I’m only a phone call away.
Tyler Neale
Sotheby's International Realty, Beverly Hills
323.578.4949 | [email protected]


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