Lawrence Yun and other economists spoke to Naples Realtors last week. Yun says mortgage rates could hit 8% later this year – but he expects around 6% by spring.

NAPLES, Fla. – Homebuyers and Realtors® should brace for even higher mortgage rates in the next two months, Chief Economist for National Association of Realtors® (NAR) Dr. Lawrence Yun said Wednesday.

“I am a little concerned that mortgage rates may go up to 8%, but in the short term,” Yun told attendees of Naples Area Board of Realtors’ 2023 Economic Summit in Naples. “By Thanksgiving time, I think it would have retreated to,” the current rate of about 7%, he said. “By early spring, I see it going closer to 6%”

Yun gave three reasons for his predictions about the 30-year fixed rate:

  • Rents will calm down, which will hold down the Consumer Price Index (CPI) and convince the Federal Reserve to stop raising the interest rate.
  • Community banks suffering from high interest rates will get some relief.
  • The spread between government borrowing rates and mortgage rates, now at an “abnormally wide spread,” will return to normal.

If only the spread between government and homeowner borrowing improves, that will help interest rates, Yun said. “Even if we just get the spread back to normal, we get to 6%,” Yun said.

High interest rates are doing a lot of damage, Yun said. Among those damages? Home sales and commercial real estate property prices are down. Community banks are struggling with interest rates and commercial real estate loan exposure. And there’s an economic slowdown because of high interest rates.

Inflation is high and the price of key items, including rent, are up significantly from a year ago, which is also a problem for real estate sales, Yun said.

Inventory still affecting the market

All three economists who spoke at the summit agreed that until more inventory is available in the right places, the market will continue to be tight, and prices will remain high.

“2023 is difficult. This year is difficult. But wait until next year when I think things will really play out in a better way,” Yun said.

Yun’s prediction is true of the entire U.S., he said. Florida, and Collier County in particular, are doing better than many areas, and better than many other years, said Dr. Brad O’Connor, chief economist with Florida Realtors®, and local market analyst Cindy Carroll.

There’s a lot to be optimistic about here in Florida and especially here in Collier County,” O’Connor said. “The underlying demand for moving into Florida is still quite high.”

O’Connor said he considers the desire to move to Florida from other states to be a permanent trend. And while inventory is down, “it’s like not the number of new listings has gone to zero. … You’re getting about the same number of listings before 2020,” unlike a lot of Florida, O’Connor said.

In addition, he said, “We have some of the healthiest homeowners in the country. No one is using subprime lending, and everybody has fixed rate loans.”

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Author: kerrys