How are Rising Interest Rates Affecting Buyers and Sellers?

Economists generally agree that interest rates are likely to continue to increase over 2023, with some predicting averages as high as 8.25% and 8.75% for 15- and 30-year mortgages, respectively. Some predict drops to as low as 5% again by year’s end depending on inflation, threat of recession, geopolitical concerns, etc.

Either way, mortgage applications are already down and home sales are likely to drop at least temporarily this year.

Home buyers — even those with ideal borrowing profiles — may find the added fees are making once-affordable homes unaffordable. They may need to redefine their maximum down payments and monthly payments and avoid fixed mortgages until rates lower.

Even with the current low inventory, many sellers can expect demand to drop as buyers shy away from the boosted rates. Some sellers will be slow to adapt and negotiate lower prices, causing homes to stay on the market longer than in the recent past. Prices aren’t expected to significantly rise in 2023, according to a recent Forbes report.

The same report predicts consumers will become more confident about buying in 2024, pending improvements to inflation and the overall economy.