BAM Key Details: 

  •® has issued its 2023 Forecast Update with changes to its outlook on home prices, sales, mortgage rates, inventory, and rent growth for the year. 
  • It now expects mortgage rates to fall to 6% by the end of the year, but the number of total home sales for 2023 is likely to be at its lowest since 2012.®  has posted its 2023 Forecast Update with a few notable changes from its November 2022 projections. 

While back in November, stood out with its prediction that home prices would not fall, the new update does show a slight decline, mainly due to what’s happening in pricey Western metros. For the most part, though, home prices have held steady this year. 

To explain why, points to mortgage rates. Per the updated report, those will drop to 6% by the end of the year. In the meantime, though, rates hovering around 7% have sidelined buyers as well as potential sellers locked into lower rates.

The lock-in effect of those sub-6% rates has a stranglehold on new listings and, consequently, on active inventory as a whole. Even with buyer demand cooling, the shortage of available homes—especially at affordable price points—has propped up home prices and intensified competition in many markets across the U.S. 

That said, low inventory will still impact total home sales, which expects will fall 15.8% to 4.2 million this year, reaching their lowest level since 2012. 

High inflation and the Fed’s actions to curb it have had a significant impact on the housing market this year. And while inflation has begun to ease, the sustained spike in mortgage rates was enough to stifle the housing market after several years of low rates and strong activity. The housing market has really seen a double whammy in 2023, with a retrenchment in the number of homes for sale coupled with still-high prices and mortgage rates that have kept both first-time and repeat buyers on the sidelines.

Danielle Hale Chief Economist



Housing affordability still has a long way to go

Persistent underbuilding of housing inventory (relative to household growth), combined with the dwindling supply of new listings, has kept home prices fairly stable. 

That said, low affordability—thanks to high mortgage rates and home prices—has significantly reduced the number of buyers actively shopping for homes. 

With that in mind, now predicts a modest 0.6% decline in home prices for the year. They also expect mortgage rates to be lower than they originally anticipated—but not low enough to make a meaningful difference in housing costs until the end of 2023. 

As inflation continues to cool, mortgage rates are expected to follow suit mid-year, reaching 6% by year’s end. But for 2023 as a whole, the cost of a mortgage is expected to be 10.5% above that of 2022. 

The lock-in effect of low mortgage rates is taking a toll on inventory

Thanks to the lock-in effect of sub-6% mortgage rates, many would-be sellers are staying put (unless they need to move), which has severely limited new listings. As a consequence, the total number of homes for sale has not met’s earlier projections. 

So, in contrast to its earlier prediction of a 22.5% increase in existing homes for sale, now expects inventory levels to fall 5% for the year. As for total home sales, the updated forecast shows a 15.8% drop to 4.2 million—the smallest annual total since 2012. 

The vast majority of homeowners locked in low rates during the pandemic and aren’t particularly excited to give them up in order to buy a new home, unless they really need to move for personal reasons.

Danielle Hale Chief Economist

Rental prices will decline year over year

Low affordability with for-sale housing has convinced many would-be buyers to continue renting. That trend will drive up demand for rentals through the second half of 2023. 

But the substantial uptick in new multi-family construction—combined with the number of renters choosing to stay where they are to save money—will likely reduce competition for new units, leading to a modest 0.9% annual decline in rental prices. 

That said, today’s average rent is still about $350 more than it was before the pandemic. 

Read the full report for more details. 

MBA Mortgage rate predictions for 2023-24

Thursday’s Hot Sheet shared housing market predictions by Mortgage Bankers Association (MBA), and Byron Lazine specifically pointed out its mortgage rate predictions for this year through 2024, with the 30-year fixed dipping below 5% in Q4 2024—roughly 1.5 years from now. 

If you’re not already a BAMx member, sign up now to get all the Hot Sheet Daily Downloads, so you can show your clients what to expect in the coming years. 

Takeaways for real estate agents

Depending on whom you ask, a 6% mortgage rate (or just under that) by year’s end could be about the best we can expect—especially with ongoing interest rate hikes, courtesy of the Federal Reserve. 

The better you understand what’s happening in the housing market—on a local and national level—the better able you’ll be to help your clients see their options clearly enough to make confident decisions. 

From there, you can help them make the most of any advantages the market offers them.