Will there be a recession?  What will mortgage rates do this year?  Will house prices go down this year?  So many questions about the economy and with good reason.  2022 was a very unique year in the United States economy and it affected housing and mortgage lending significantly.

First, will there be a recession?  Nobody knows for sure, but most economists are thinking we will have a “soft landing” out of this mess of inflation.  This is primarily because the job market is strong and unemployment is low.  People are working and there are plenty of jobs for those that want to work.  Of course, an unforeseen catastrophic event can change everything, but for now, 2023 should slowly see both inflation and the overall economy get better.

Mortgage rates should go down, ever so slightly, probably landing and staying around 5.50% for a 30 year fixed rate mortgage throughout the year.  This is much better than the 7.25% we hit in the fall of 2022, but not even close to the 3.0% rates we had just one year ago right now.  2022 set a record for the highest increase of rates within a calendar year – never have rates risen so fast in so short a time as they did from March 2022 to October of 2022.  For those of us in the mortgage lending field, it was a crazy time.

Most economists see house prices going down in 2023, but not that much, probably between 5% and 10%.  Of course, some regions where house prices inflated the most might see prices go down more than that, but overall, we are not going to see prices drop like we did in 2008 and 2009.  We are living in a very different economy than back then.  How so?  Well, for one, we won’t see foreclosures like we did back then.  Most homeowners, in fact almost 2 out of 3 homeowners, have an interest rate lower than 4.0%.  And 98% of homeowners have a fixed rate mortgage.  This is drastically different than during the housing crash of 2008 when 2 out of 5 homeowners had an adjustable rate mortgage and 80% of homeowner’s interest rates were higher than 4.0%.  Secondly, homeowners have a ton of equity in their homes.  Because of the fast appreciation we have had in the last 2.5 years, and most homeowners have not tapped that equity like they did before 2008, homeowners are not going to walk away from their homes.  Thus we won’t see gobs of homes come on the market from foreclosures.  This adds to the overall reason we won’t see prices go down much – we have a major shortage of homes on the market.  For 10 years new construction has not met the demand of new homebuyers.  Simply put, there are way more people that want to buy a home than there are available homes to buy.  High Demand and Low Supply always equal higher prices.

So, we shall tread water in 2023 and slowly watch mortgage rates and housing normalize.