Source: Forbes —
Key takeaways
- Mortgage demand for purchases is down 41% year-over-year, and refinance demand is down 84% year-over-year.
- Housing prices are higher than a year ago, and experts believe they will continue to climb overall, with some areas seeing price declines.
- 2023 is expected to be a poor year for housing, with the industry mounting a recovery in 2024.
As interest rates continue to climb higher and the threat of recession becomes more real by the day, housing demand has slowed.
As always, Q.ai is here to help. Here is what is currently happening in the housing market and the outlook for where demand, interest rates and housing prices are headed in 2023.
Current mortgage rates
The national average mortgage interest rate for a 30-year traditional mortgage is approximately 6.44% as of January 10, 2023. This is more than double the average mortgage interest rate of 3.22% at the beginning of 2022.
This is only a rough guide since a buyer’s final interest rate depends on a few factors, including their down payment, credit score, debt-to-income ratio and location. However, even if borrowers have an ideal borrowing profile, they’ll still pay a high interest rate compared to the early months of 2022.
A homebuyer with a 20% down payment for a $550,000 home and a 6.44% interest rate on a 30-year fixed mortgage will have a monthly payment of $2,764. At the beginning of 2022, the same loan with a rate of 3.22% would cost $1,908 a month, a difference of $874.
Mortgage applications are down
The increase in interest rates has put strong downward pressure on mortgage applications. The average mortgage contract interest rate decreased over the last two months of 2022, from 7.08% to 6.42% by year-end.
