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6 2023 HOUSING AND ECONOMIC PREDICTIONS e year 2022 was full of financial hurdles for many, with economic uncertainty and a volatile housing market, resulting in many homebuyers and homeowners struggling to purchase a home or keep up with monthly mortgage payments. e positives worth celebrating in 2022 included the nation's robust job market and the continued recovery from the COVID-19 pandemic. Meanwhile, there were significant negatives, from rampant inflation to rapidly rising interest rates. A study from LendingTree revealed experts now predict that the mixed nature of 2022 will likely persist into 2023, with some economic prospects likely to improve, while others could worsen. Here are the LendingTree predictions for the state of housing, jobs, and the economy in 2023: Average interest rates on 30-year fixed mortgages will be between 5.5% and 6.5% when 2023 ends. Given mortgage rates' volatility in 2022, it's impossible to say with total certainty where they'll land when 2023 ends. After peaking at 7.08% in the second week of November, the average rate for 30-year fixed mortgages fell to 6.42% by the end of December, owing to good inflation news. If inflation news remains good, rates over the coming year will likely stabilize near where they were at the end of 2022, or even continue to fall. at said, borrowers shouldn't expect rates to fall to anywhere near their record 2021 lows, or even as low as at the start of 2022, when the average rates for 30-year fixed mort- gages were 2.65% and 3.22%, respectively. Home prices will fall between 5% and 10% nationally year over year. Home prices won't necessarily fall every- where, but a combination of relatively high rates and weak homebuyer demand will likely push down prices nationwide in 2023. While a 5% to 10% drop may seem steep, declines this year are unlikely to wipe out the home price gains many houses saw over the past few years. For example, according to the S&P/ Case-Shiller U.S National Home Price Index, home prices increased by 11.33% from January 2020 to January 2021 and 19.25% from January 2021 to January 2022. ough home price growth has since decelerated, prices rose by 10.65% year over year in September 2022. Owing to these gains, price drops of 5% to 10% would still leave the housing market much pricier than before the pandemic. The unemployment rate will rise above 4%. Over the coming months, businesses will likely continue layoffs and other cost-cutting measures that'll push unemployment above its current 3.7% level (as of November 2022). Rising unemployment may seem scary—es- pecially since it means some people will lose their jobs—but the jobless rate rising to 4.5% or 5% would still be relatively low historically. Year-over-year inflation growth will fall to between 3% and 4%. Diminished demand resulting from the Federal Reserve's rate policies, higher unem- ployment, and improvements to global supply chains should help bring down inflation as the year progresses. While inflation appears poised to remain above the Fed's ongoing target of 2% growth this year, consumers should feel relief compared to what they saw in 2022. Last year, the year- over-year growth in the personal consumption expenditures (PCE) index each month was commonly more than 6%. (e Fed's preferred measure of inflation is the PCE index.) e federal funds target rate will end up around 5%. e current federal funds target rate is 4.25% to 4.50%, and we'll likely see a few more rate hikes over the coming months. However, assuming inflation shows sustained moderation, the Fed will likely stop raising its target rate before too long. Importantly, this doesn't mean the Fed will cut rates—just that they'll stop announcing new hikes. Potential Economic Upsides in 2023 • Even if it does cool, the housing market likely won't crash like in 2008. While the housing market looks to be softening as buyer demand dissipates, it still doesn't seem as though we're likely to see a 2008-style crash in 2023—even if 41% of Americans expect a crash this year. Owing to how strong many of the housing mar- ket's fundamentals have remained—like borrowers' ability to make their payments on time—the housing market (even in the face of high inflation) doesn't appear at serious risk of a total meltdown. • Home price growth will moderate, and even come down in some areas. ough declines in home prices are often seen as more of a negative than a positive, declines this year may not be all bad news. is is especially true for buyers who may be struggling to keep up with persistently high prices. For those worried about price declines, it's worth noting that because home values have increased so much over the past few years, current homeowners will likely be able to hold onto most of the home equity they've built, even if prices come down. • Inflation will likely come down. Inflation remained persistently high through 2022, much to the dismay of economic policy- makers and consumers alike. ere does seem to be some evidence that inflation has just about peaked and could soon start slowing down more significantly—at least in the U.S. Even though inflation will likely remain somewhat elevated in 2023, it shouldn't be as bad as in 2022. • Supply chains should improve. In 2023, supply chain issues are poised to get better, especially as major manufacturing nations Journal