What to Expect from the Local Housing Market in 2023
The 2022 housing market has been defined by two key things: inflation and rapidly rising mortgage rates. And in many ways, it’s put the market into a reset position.
As the Federal Reserve made moves this year to try to lower inflation, mortgage rates more than doubled – something that’s never happened before in a calendar year. This had some impact on buyer activity, the balance between supply and demand, and home prices. As those things changed, some buyers and sellers put their plans on hold and decided to wait until the market felt a bit more predictable.
What does that mean for 2023? What everyone really wants is more stability in the market in 2023. For that to happen we’ll need to see the Federal Reserve bring inflation down even more and keep it there.
What’s Ahead for Mortgage Rates in 2023?
If inflation is high, mortgage rates will be as well. If inflation continues to fall, mortgage rates will likely respond. There are early signs inflation is easing, but we're not out of the woods yet.
It's hard for experts to say exactly where interest rates will land. They're expecting mortgage rates to stabilize somewhere between 5.5% and 6.5% in 2023.
What Will Happen to Home Prices Next Year?
Home prices are defined by supply and demand. The more buyers and fewer homes there are on the market, the more home prices rise. That’s exactly what happened during the pandemic. Prices in our metro area rose quickly during that time and continued to rise in 2022. It's still a seller's market but the supply of homes is growing, and buyer demand has pulled back a bit due to higher mortgage rates
In our metro area, expect a more neutral market in 2023 with flat to moderate increases in home prices. Over the next five years, homes will likely continue to appreciate, just at a slower rate than we've experienced over the last two years. Homeownership in the Fargo-Moorhead metro area will continue to be a sound investment.
Bottom Line
The 2023 housing market is going to be defined by mortgage rates, and rates will be determined by what happens with inflation. The best way to keep a pulse on what's happening in our real estate market is to lean on a trusted real estate advisor.
