House prices are expected to continue rising in the coming year: here’s where

By | December 1, 2022

Americans looking to buy a home in the next year can expect less competition, more homes to choose from and the highest average mortgage rates in nearly two decades. Here’s what they can’t expect: a general drop in prices that would bring relief to low-priced homebuyers.

That’s the key takeaway from’s 2023 housing forecast released on Wednesday. The declines in home prices “may not happen as quickly as some have predicted,” said chief economist Danielle Hale. Prices will be elevated during the first half of 2023 and likely to decline or remain stable during the second half of next year, she told CBS MoneyWatch.

“We expect that for the year as a whole, 2023 will be bigger,” Hale said. “Buyers looking to buy may have to wait a while.”

The real estate market will soon turn the page in 2022, a year in which mortgage rates have skyrocketed alongside rising home prices. Some cities in particular – like Boise, Idaho; and Austin, Texas – saw double-digit percentage increases in prices. The rising cost of home ownership has deterred many would-be buyers, who have opted to continue renting.

Home prices dropped in many areas during late 2022, but mortgage rates continued to rise. The average interest rate for a 30-year fixed mortgage was around 6.6% this week, more than double the rate at the start of the year.

High mortgage rates reduce home sales

02:09 expects mortgage rates to rise further early next year as the Federal Reserve continues to raise its benchmark interest rate. Mortgage rates could top 7.4% in the first half of 2023, before settling around 7.1% in the second half of the year, the company said. When factoring in increases in home prices and lending rates, the typical monthly mortgage payment next year will be about $2,430, up 28% from this year, predicted

The rapid increase in prices has frustrated many potential buyers. In a recent survey by LendingTree, nearly half of respondents said they were putting off major decisions, whether it be renting for a longer period of time or postponing major home renovations.

Mortgage rates have risen so fast this year that it’s made it difficult for homebuyers to figure out how much home they could afford, Hale said. In 2023, interest rates are unlikely to fluctuate as much, she said.

“Having more stability will make it easier for buyers to set the right budget,” she said. “And that should help encourage people to get back into real estate.”

Average 30-year fixed-rate mortgages reach highest level since 2001


Larger metropolitan areas

Home prices are likely to rise in the nation’s 100 largest metro areas, the report said. Expect 10% increases in Grand Rapids, Michigan; Portland, Maine; Providence, Rhode Island; Spokane, Washington and Worcester, Massachusetts.

Higher prices are likely to drive away many potential homebuyers, sending rent prices up 6.3% and the number of homes sold down 14%, said. However, the housing stock – the number of homes available for sale – is expected to rise by nearly 23% over the next year, potentially giving a wider range of homes to choose from for those who can afford to buy.

To be sure, all those forecasts could change depending on how the Federal Reserve handles its fight against inflation next month and early next year, Hale said. The Fed has increased your referral fee six times this year, and with each rise, mortgage rates have also risen. Hale and other economists expect the Fed to raise its rate again next month, but perhaps not as much as previous hikes.

“The housing market took the brunt of the Fed’s attempt to control inflation,” said Sean Black, CEO of mortgage lender Knock, in his company’s 2023 housing forecast. and many will continue to favor sellers well into 2023.”

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