For a year we have had to deal with rising interest rates and lower home affordability. Much of this was expected after record-low interest rates helped fuel a real estate purchasing frenzy which resulted in prices increasing by double digits for the past few years. Fast forward to today, and home prices have held relatively steady in 2023, while interest rates have increased significantly, keeping home affordability low, especially for first time buyers.

The question is—has the tide turned? The Federal Reserve Board hiked short-term rates ten times over the past 14 months in response to a return to normalcy in the economy and a spike in inflation. Now the economy is slowing, and inflation has been waning as well for almost a year. Could the Fed cycle be over — and could we see lower mortgage rates during the second half of 2023? And if this scenario came to fruition, would this help homes become more affordable? There are three facets of affordability: personal income, mortgage rates and home prices.

Income has continued to rise over the past year, but has not kept up with the increase in home prices or interest rates and a slowing economy should result in smaller gains in personal income as well. Home prices have stopped rising, but they have not fallen as much as predicted because of the shortage of inventory. Thus, interest rates become a major factor in this equation. A significant move downward would definitely help with regard to affordability, with one caveat. The lower interest rates would have to encourage more sellers to list their homes in order to prevent home prices from starting to accelerate again under this scenario. In a perfect world, this would be where the tide would be heading.

Dave Hershman is the top author in the mortgage industry. Dave has published seven books, as well as hundreds of articles and is the founder of the OriginationPro Marketing System and Mortgage School. Want to send this commentary and other news in a personalized format to your sphere database or on social media?  Sign up for a free trial at