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44 | M REPORT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Experts Predict Home Prices to Fall YoY Nationwide in 2023 A combination of relatively high rates and weak homebuyer demand will likely cause a gradual decline in prices nationwide in 2023. T he year 2022 was full of financial hurdles for many, with economic uncertainty and a vola- tile housing market, resulting in many homebuyers and home- owners struggling to purchase a home or keep up with monthly mortgage payments. The 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 im- prove, while others could worsen. Here are the LendingTree pre- dictions 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. That said, bor- rowers 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 mortgages were 2.65% and 3.22%, respectively. Home prices will fall be- tween 5% and 10% nation- ally year over year. Home prices won't necessarily fall everywhere, but a combina- tion of relatively high rates and weak homebuyer demand will likely push down prices nation- wide 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. Though 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 finish 2023 by rising above 4%. Over the coming months, businesses will likely continue layoffs and other cost-cutting mea- sures that'll push unemployment above its current 3.7% level (as of November 2022). Rising unemploy- ment may seem scary—especially 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% by the end of 2023. Diminished demand result- ing from the Federal Reserve's rate policies, higher unemploy- ment, 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, con- sumers 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%. (The Fed's preferred measure of inflation is the PCE index.) The federal funds target rate will end up around 5%. The 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 » Even if it does cool, the housing "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."