It’s that time of year again.

There’s no doubt 2022 was an interesting year for real estate, to say the least. However, what can we expect for the future as we kick off the new year? Here are the top 10 real estate and mortgage predictions for 2023 we've selected as most likely:

1. Home prices will continue to rise.

During the COVID-19 pandemic, we saw an unprecedented boom in real estate appreciation with double-digit growth. While those days are over, a return to single-digit growth is still likely due to pent-up demand and a shortage of inventory. Also, the security-backed 30-year fixed-rate mortgage, which is unique to the U.S., gives banks the confidence needed to lend in this environment.

2. Housing inventory will remain low.

National housing inventory is unlikely to meet the demand for homes in 2023, even as sales are expected to decline by more than 15%, according to Fannie Mae. Builders pumped the brakes on new construction single-family homes in 2022, a trend that we expect to continue into the new year.

3. Mortgage rates may stabilize.

2022 saw the end of the sub-3% mortgage rate, however, we don’t expect the Fed (The Federal Reserve) to continue its trend of raising the benchmark rate at every meeting. We align with economists who say rates might stabilize and we could even see some rate declines in the second half of 2023 once inflation gets under control.

4. Gen Zers will continue to drive the market.

In a healthy real estate market, first-time homebuyers represent a significant portion of transactions. Gen Zers, those born in the late 1990s through 2012, will employ innovative tactics, such as cash offer programs, equity sharing with roommates, and increased income from side hustles, to help them qualify for homes.

5. Millennials will look to upsize.

The millennial generation, which now represents the largest share of homebuyers and move-up buyers, will take advantage of this buyer’s market to upsize into larger homes. Growing families and the eventual need to care for aging parents will drive this trend.

6. The buyer’s market will continue.

We predict the housing market will firmly favor buyers in 2023. Less bidding and more contingencies will give buyer’s the upper hand and push sellers to make concessions such as paying for repairs and buying down the buyer’s interest rate.

7. Rents will continue to rise.

With inflation still above desired levels and interest rates expected to remain where they are, rent increases can be expected. Rising homeownership costs will keep rental demand high and experts predict rental price growth to be as high as 8.4% by May.

8. Homeowners will tap into their equity.

Untapped home equity continued to break records in 2022 with almost $9 trillion sitting idle and nearly 50% of homeowners considered “equity rich” — meaning their mortgage balance is less than 50% of the home’s market value. We predict homeowners will continue to tap into this equity for home renovations in lieu of shopping for a new home.

9. The housing markets to watch.

Midwest markets lead the pack of the top markets to watch with Columbus, Ohio; Indianapolis; and Minneapolis the least like to experience price declines over the next twelve months. However, markets that boomed during the pandemic, including Boise, Idaho; Austin, Texas; and Raleigh, North Carolina expected to see the sharpest price declines.

10. Top 7 housing markets.

No two markets are the same and while some will see growth and other will see declines, it's been suggested these 7 markets will dominate in terms of population growth and housing appreciation: 

1. Myrtle Beach, South Carolina

2. Colorado Springs, Colorado

3. Atlanta, Georgia 

4. Naperville, Illinois

5. McAllen, Texas

6. Chesterbrook, Pennsylvania 

7. Kirkland, Washington.

2023 is shaping up to be an exciting year for first-time buyers and move-up buyers who aren’t afraid of higher interest rates — which are still below the historical average. When you work with our home loan advisors, you’ll know you’re in good hands. We are well-versed in all types of purchases (from homes to condos to planned unit developments), we offer competitive interest rates, and we can help find the right solution for you.