As we approach the new year, what changes can we expect for mortgage rates and home prices?
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2023 is just around the corner, and many prospective home buyers are questioning mortgage rates and home prices. I’ve pulled together some expert insights to help you understand what the new year holds.
Mortgage Rates
Over the past year, mortgage rates have increased (quite dramatically) in response to inflation. The average 30-year fixed mortgage rate surpassed 7% at the end of October – recording the highest rise in over 20 years.
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“Just one year ago, rates were under 3% This means that while mortgage rates are not as high as they were in the 80’s, they have more than doubled in the past year. Mortgage rates have never doubled in a year before.” Freddie Mac
While we can’t predict with certainty, experts agree that mortgage rates will continue to respond to inflation.
Home Prices
Home price appreciated has slowed in most markets, but the deceleration is generally more dramatic in areas that experienced the strongest peak appreciation rates. Experts projections for home prices in the coming year are mixed, but the general consensus is home price appreciation will vary by local market.
A few other important points to consider:
- Home affordability has worsened. With the typical home currently costing $434,978, and rates over 6%, the monthly mortgage payment of $2,061 eats up more than 36% of the median monthly income, according to Black Knight.
- Incomes aren’t keeping up. Making affordability matters worse, home prices vs. income levels are not measuring up. Over the past five years, while the average home price has gone up 60%, the average income has risen less than 15%.
Keeping all of the above information in mind when shopping for a new home is important. It will affect your spending power, monthly mortgage payment and interest rates. If you have any questions about inflation, home prices, lending options, or any other home buying inquiry, feel free to reach out!
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