The 2022 housing market was challenging for everyone, unlike what we have become used to. Just a year before, many homebuyers enjoyed rates of 3% or even lower. Heading into 2023, rates are higher, and there is also a nationwide shortage of available homes, both existing and newly constructed. Meanwhile, renters pay more monthly, with no equity to show for it! So what’s the housing market outlook for 2023? At Atlantic Bay Mortgage Group, we believe there is good news for mortgages and inflation in the coming year – let’s take a look.

How Did We Get Here?

Due to many worldwide economic events in 2022, inflation has affected everything from gas prices to groceries to mortgages. In response to these events, the Federal Reserve has repeatedly raised interest rates to get the economy back on track.

Let’s quickly clarify – the Fed, which is the U.S. central banking system, doesn’t raise mortgage rates; it controls the “federal funds rate” and “discount rate,” which are charges for overnight loans from bank to bank or from the Fed to member banks. The rate was lowered to nearly zero in March 2020 in response to the Covid-19 pandemic. Now we are seeing the reversal of these drastic measures.

But we are still recovering from the pandemic. Covid-19 remains a health threat, and its impact on the supply chain has made it more difficult to obtain items from baby formula to our favorite sodas – and when we do find them, they cost more.

Good News for the New Year 

But here’s the good news we promised!

First, the housing market constantly fluctuates. Historically, rates are still much better than they were just a few decades ago. And if you’re ready to purchase sooner than later, there are many options to help you offset higher rates. For example, you can consider a temporary buydown to lower your interest rate for the first two years of your mortgage. With luck, rates will be lower in a couple of years, and you can refinance to a better one.

Second, the November Consumer Price Index (CPI) report showed signs of inflation starting to slow (maybe you’re in a region where gas finally dipped below $3 in December). Better yet, mortgage rates have come down 1% since the CPI report. Once inflation peaks, mortgage interest rates typically follow. 

But has inflation reached its peak? It’s too soon to tell. The Fed may continue to raise rates into 2023. But experts from the mortgage market analytics firm MBS Highway expect the Fed to at least slow this approach next year and for rates to come back down into the 5% range again, albeit over time.

New 2023 Loan Limits 

In November, the Federal Housing Finance Agency (FHFA) announced its 2023 conforming (“conventional”) loan limits, raising them from $647,200 to $726,200 for one-unit properties for most U.S. counties. Atlantic Bay has already implemented these limits.

This rise in limits is good news for several reasons. First, it means home prices are still rising and adjusting loans accordingly. But higher-priced homes aren’t necessarily bad for buyers. In the current market, there are approaches you can take to save money, such as negotiating seller concessions to pay for your closing costs. And once you’re a homeowner, appreciation will create your equity faster.

Finally, if you are seeking a larger loan amount, higher loan limits mean you can enjoy more flexible lending and down payment options instead of needing a “jumbo loan,” which is typically harder to qualify for and carries higher interest rates.

The Federal Housing Administration (FHA) has also raised its limits from $420,680. The best way to find your county’s limit is on the FHA Mortgage Limits website. The U.S. Department of Veteran Affairs (VA) and the U.S. Department of Agriculture (USDA) have not released their 2023 limits yet.

Happy Homebuying in 2023

We hope this gives you a sense of the housing market outlook for 2023. No matter how the markets are performing, owning a home is still perhaps the best way to provide you and your family with a place to build your dreams, security, and wealth. If you want to buy a home, it’s never too soon to learn about the mortgage process or even get pre-approved. To get started today, you can complete our inquiry form online, call us at 704-307-4694, or EMAIL US (