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What Are Mortgage Rate Projections for 2023?

  • The 30-year fixed mortgage rate currently sits at around 7%.
  • A year from now, some experts suggest this rate could surge to around 11.6%.
  • Real estate investors are in a tough spot deciding if it’s time to pull the trigger on property that could decline in value.
Mortgage rate - What Are Mortgage Rate Projections for 2023?

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For investors looking at real estate to supplement equity and fixed income holdings, it can be a tricky time to be an investor. Questions around where the 30-year fixed mortgage rate is headed continue to add complexity to an already-difficult decision making process.

House price forecasts have come down in a big way of late. Previous forecasts from Zillow in the spring suggested house prices could rise around 18% by spring 2023. Those forecasts have come down dramatically, with the most recent forecast calling for 1.4% growth over the next 12 months.

Now, that still means housing prices in aggregate across the U.S. are likely headed higher. However, it’s the steep pace of forecast declines that have some worried. Other experts are calling for property price declines of as much as 20%, should mortgage rates continue higher.

Let’s dive into where mortgage rates could be headed, and what that could mean for real estate investors right now.

Where Will the 30-Year Mortgage Rate Be in 2023?

With the Federal Reserve intent on raising interest rates to bring down inflation, it appears mortgage experts believe this will flow through to a much higher 30-year fixed mortgage rate moving forward. According to The Economy Forecast Agency, the outlook for the 30-year fixed mortgage rate in October 2023 is not pretty. A year from now, borrowers could be hit with mortgage rates around 11.7%. For context, rates currently sit just shy of 7%.

Indeed, as interest rates rise, real estate valuations typically take a big hit. That’s because a significant portion of the traditional home purchase is financed. With borrowers able to afford less, sellers must lower prices to meet demand. This is the primary aim of the Fed’s rate hiking program right now, as housing inflation accounts for roughly 40% of the key CPI metric.

It seems Zillow’s rosy forecasts might not come to fruition if mortgage rates do head higher in line with expert projections. Of course, these projections are typically made using backwards-looking data. Thus, if the Fed pivots, mortgage rates could be lower a year from now. It’s really hard to tell, and this is why forecasts are almost always wrong.

For now, it’s going to be tough sledding for real estate investors. Those looking to buy right now will have to lock in 7% rates with little likelihood of refinancing at lower rates, at least for the next couple years. Additionally, prices may continue to decline, meaning a patient approach may be rewarded.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


Article printed from InvestorPlace Media, https://investorplace.com/2022/10/what-are-mortgage-rate-projections-for-2023/.

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