Homes likely to get cheaper in 2023, but now may not be the best time to buy

Although house prices are expected to fall in 2023, buying a home will become more expensive.

According to a new forecast from Freddie Mac, the price of a home for sale is expected to decrease by 0.2% in 2023. Meanwhile, a 30-year fixed-rate mortgage will rise to 6.4%.

A 30-year fixed rate mortgage currently averages around 5.4%.

The increase could make a $200,000 home cost about $23,000 more over the course of a 30-year loan.

In 2022, housing prices increased by an average of 6.7% compared to last year. Home prices rose 17.8% in 2021 due to low interest rates.

But the Federal Reserve tried to limit inflation by raising interest rates. The result could have a dramatic impact on the housing market.

Freddie Mac expects to sell just 5.1 million homes in 2023, down from 5.8 million this year and 6.9 million last year.

“Mortgage rates increased at their fastest pace in four decades, quickly taking the sails out of the housing market,” said Sam Hutter, chief economist at Freddie Mac. “Driven by stubbornly high inflation and higher mortgage spreads, rising rates have created affordability issues that have prevented many consumers from making the decision to buy a home.”

With fewer homes sold, housing supply should increase.

“As activity in the housing market continues to decline, we expect the supply of homes available for sale to gradually increase from last year’s historically low levels. The combination of much lower demand and higher supply will lead to lower house prices next year,” Hutter added.