**The U.S. Housing Market Finds Stability in 2023**
In 2023, the U.S. housing market has finally found stability after experiencing a mild price correction in the second half of 2022. With factors such as declining mortgage rates, a shortage of available homes for sale, and an increase in demand during the spring months, many regions have achieved a semblance of equilibrium. However, a new threat looms as mortgage rates rise to 7%, potentially impacting the market going forward.
**The Return of 7% Mortgage Rates**
Recent data shows that the average 30-year fixed mortgage rate has increased to 7.13%, a significant jump from the low of 5.99% seen earlier this year. This rise in rates puts mortgage rates just below the peak of 7.37% witnessed in October. Researchers at the Federal Reserve Bank of Atlanta warn that whenever mortgage rates approach the 7% range, housing affordability reaches levels comparable to the peak of the housing bubble.
**The Impact on Home Prices**
With the resurgence of 7% mortgage rates, the housing market faces the possibility of month-over-month declines in home prices, particularly as it enters the historically subdued fall and winter period. After experiencing a 5.1% dip between June 2022 and January 2023, U.S. home prices rebounded with a 4.2% surge from February to May 2023. However, the current increase in mortgage rates raises concerns about the sustainability of this growth.
**Divergent Opinions Among Housing Economists**
Housing economists are divided on whether the recent uptick in mortgage rates will lead to further declines in home prices. Some economists, such as those at Morgan Stanley, Moody’s Analytics, Freddie Mac, and Capital Economics, anticipate a decline in national house prices in the second half of 2023, erasing the gains made in the first half. Conversely, economists at AEI Housing Center, Zillow, and CoreLogic believe that U.S. home prices have bottomed out due to the limited inventory of homes for sale, even with elevated mortgage rates.
**Factors Affecting Housing Affordability**
While housing affordability has significantly deteriorated, economists at AEI Housing Center emphasize the importance of the resilient labor market, with a historically low unemployment rate of 3.6%, as a supporting factor for national home price growth. It is important to note that discussions about “U.S. home prices” on a national level may not reflect the situation in specific regional markets. For instance, overheated markets like Austin may continue to experience price declines, while relatively more affordable markets like Scranton may see gradual growth.
**Staying Informed About the Housing Market**
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