The last few years have produced unforeseen changes in the real estate market from record breaking sales, record breaking low mortgage rates, high inflation for homebuilding, and now low inventory with high mortgage rates. Heading into 2023, Fannie Mae’s economists share their expertise and predictions for the next two years.
“A modest recession” is what Doug Duncan, Fannie Mac Chief Economist says we are looking towards. Home sales are expected to decrease while homeowners are reluctant to give up their low mortgage rates. We have already seen federal mortgage rates increase significantly during the third quarter of 2022 which has slowed down the steep home price increases we saw during the pandemic.
Economists predict 2023 to see a decline of 21.5%. Then in 2024, sales will bounce back by a 19% increase. Even though the real estate market home inventory is lower than ever before, the supply has been rebuilding over the last few months. This may be due in part to longer days on market rather than more home being put up for sale.
Federal mortgage rates are believed to have peaked at 7% and we should see then start to decline and settle around 5% throughout the coming two years. Fannie Mae economists also compared the home appreciation that occurred during the pandemic which increased to 20%, to coming years showing potential depreciation due to those unprecedented 2021-2022 sales prices. This may affect some markets harsher than others while some markets may continue to rise.
We would like to share how we think this will play out in La Plata County and assist you in today’s market in any way we can. Please reach out to us with any questions you have.