Some of the country’s top real estate economists predict that mortgage rates will decline in 2023, but in reaction to the U.S. economy’s ongoing resiliency, they have remained higher for longer than anticipated. The majority of analysts anticipate that the central bank will maintain current rates, despite the fact that a report released last week revealed the economy’s continued strong growth in the third quarter, expanding at an annual pace of 4.9%. Even if rising mortgage rates have put off purchasers, most major U.S. cities continue to see increases in home prices. In early October, mortgage rates were significantly higher than 7%. In the first three quarters of 2023, rates increased, peaking at 7.31% in late September.
Economists forecasted at the beginning of 2023 that mortgage rates would progressively drop during the year, but that prediction hasn’t yet taken place. The struggle in the housing market is mostly between high mortgage rates and a small supply of available properties due to the hesitance of low-rate mortgage holders to sell. Since the summer, mortgage rates have increased, and house sales have varied. The Census Bureau revealed this week that while new house sales increased 12.3% in September, the median price also decreased by the same percentage. In contrast, pending home sales rose by 1.1% in the previous month.
Price gains are most noticeable in Los Angeles, as over the 12-month period ending in September 2023, property prices there rose by 23.8%. According to Realtor.com, chief economist Danielle Hale, “as is the case nationally, home prices have risen in these places because there are simply not enough homes built to meet demand.” One explanation for this could be that, in spite of the increased expenses, purchasers who were waiting for lower mortgage rates are coming back into the market. September saw a decline in home sales for the fourth consecutive month as a result of the continuously high mortgage rates that have put California’s housing market to the test. For the third month in a row, however, the median home price increased, marking the largest year-over-year increase in more than a year. The recent trend of declining home sales has been attributed in part to persistently high mortgage rates. Due to rising inflation and mortgage rates, California has one of the most expensive real estate markets in the country.
In many counties, 2023 will be a better year to buy a house if projections about the California housing market come true. Inventory is rising and prices are expected to be the lowest since the start of the current real estate boom. If home loan rates keep rising, it may also get harder to sell since fewer borrowers will be able to purchase properties at prices from the historic lows of 2020 and 2021. However since median sales prices are lowering in many counties and large cities, it is often preferable for homeowners to sell now rather than wait.
