So we're already two weeks into 2023! How’s it goin? Have any cool plans for the year?
 
If any of your plans hinge on how the market performs, you’ll want to know what 2023 will bring in terms of the real estate market.

Today's interest rates sit at around 6.4%. Are we Hopeful?  Were the Feds successful? Did they shock the housing market enough to curb inflation?
 
Last year was a doozie for the housing market. The Fed’s attempt to curb inflation let to an overall 3.22% rate hike – similar to what folks experienced in 1981. Although back then they capped out at over 18%(yikes).
 
In November we saw rates soar to over 7%.  
 
Historically, 7% is below the national historic average of 7.76% for the 30-year fixed, yet the impact of the 3.22% increase definitely shook up the housing market.
 
The intent behind the interest rate shock was to stop buyers & investors from bidding up prices, and force homebuilders to pull back on construction, helping the supply chain recover.  
 
And so far, it has worked.
 
Here are some Orange & Sullivan County Stats:

• Looking at a 12 month average, Closed sales in Orange & Sullivan Counties have decreased by almost 16% .

• Home prices are beginning to come down too.  Looking at a 3 month average, here's what happened to the median sales price from Sept - Dec (this takes into account homes that pended Oct with interest rates at almost 7% and closed in December)

  • Orange County’s sales price went from 405K to 386K – about a 5% decline.

  • Sullivan County’s home prices experienced a 7.5% decline.

  • Our entire MLS experienced a 12.4% decline. This encompasses Orange, Sullivan, Rockland, Westchester, parts of Ulster, the 5 boroughs & NYC combined.

Did the Fed's strategy work enough? We have to look at affordability. 
 
In order for affordability to de-pressurize, either home prices need to decline, interest rates need to decline, or income needs to increase.
 
We all have our eye on the interest rates. Here’s what experts predict will happen this year.
 
Mortgage Bankers Association: The D.C.-based trade group projects that the 30-year fixed mortgage rate will average 5.2% in 2023. Beyond this year, it expects the average mortgage rate to hover around 4.4% in 2024 and 2025.

Fannie Mae: Economists at Fannie Mae, which was chartered by U.S. Congress in 1938 to provide affordable mortgage financing, project that the 30-year fixed mortgage rate will average 6.3% in 2023 and 5.6% in 2024.

Freddie Mac: Economists at Freddie Mac, which like Fannie Mae was also chartered to provide affordable mortgage financing, forecast that the 30-year fixed mortgage rate will average 6.4% in 2023.

Goldman Sachs: The investment bank projects that the fixed 30-year mortgage rate is poised to average 6.2% in 2023. (Here's Goldman Sachs' home price outlook).

Moody's Analytics: The financial intelligence arm of Moody's projects that the 30-year fixed mortgage rate will average 6.5% through the 2023 spring housing market. (You can find Moody's Analytics regional and national home price outlook here.)

Morgan Stanley: The Agency MBS strategists at Morgan Stanley believe that mortgage rates will fall to 6% by the end of 2023. (Here's the investment bank's home price outlook.)

Realtor.com: Economists at the home listing site believe the 30-year fixed mortgage rate will average 7.4% in 2023.
 
Looking at the immediate future, Interest rates are predicted to increase again, in the first quarter.  While inflation is declining, it’s not yet where the Feds want it.
 
So that means home prices will continue to normalize or decrease throughout the year. Most are predicting a 10% drop from peak to through in our area.
 
Some good news is we are not located in a region where the home prices are significantly overvalued. You can see these locations on the graphic below.

So overall, Our local markets are more stable than many, many others, and interest rates are not expected to increase all that much. Price declines will happen gradually - Possibly so gradually you won't even notice it.  So yes, we are hopeful. 
 
Have real estate questions? Need some advice?  Call & ask us anything. You deserve to get what you want this year. 
 
Here’s to an incredible 2023-