Here’s what actually happened: mortgage rates did not drop in 2023 the way the country’s top economists said they would. At the start of the year, the Mortgage Bankers Association, the National Association of Realtors, and Redfin all predicted rates would ease from around 6.5% down into the low-to-mid 5% range by the end of 2023. Instead, rates climbed higher, touched nearly 8% in October, and finished the year still hovering in the high 6% to low 7% range. I recorded a video in early 2023 walking through those forecasts in real time. Looking back at it now, this is less a story about who was “right” and more a case study in why mortgage rate predictions are so hard to trust, and why I coach my Montgomery County clients to plan around the rate that’s actually available, not the one economists hope shows up.
What Did Economists Predict for Mortgage Rates in 2023?
The consensus at the start of 2023 was that rates were heading down, not up. Coming off a brutal 2022, where rates rocketed from the low 3% range in January to above 7% by October, the mood among forecasters was that the worst was behind us. The Mortgage Bankers Association’s chief economist projected rates easing from around 6.5% to roughly 5.2% by the end of 2023, tied to expectations of a looming recession. Lawrence Yun, chief economist for the National Association of Realtors, forecast a similar drop to about 5.7%. Redfin’s data team expected rates to settle near 5.8%. The shared logic: slowing inflation plus a softening economy usually pulls long-term rates, including mortgage rates, back down with it.
What Actually Happened to Mortgage Rates in 2023?
Rates went up, not down, and stayed elevated most of the year. Instead of drifting toward the low 5% range, the average 30-year fixed rate climbed through the spring and summer and peaked near 7.8% in October 2023, according to Freddie Mac’sPrimary Mortgage Market Survey. That’s higher than where rates stood when the “rates will drop” predictions were made in the first place. By December, rates had eased slightly off that peak but were still sitting in the high 6% to low 7% range, nowhere close to the mid-5% forecasts. You can pull the full weekly rate history yourself onFREDif you want to see the climb and pullback plotted out.
Why Did the Predictions Miss So Badly?
Inflation cooled slower than the models assumed, and the Fed kept its foot on the brake. The forecasts I covered in my video leaned on the idea that inflation would fade quickly enough to let the Fed ease up, which would drag mortgage rates down with it. Instead, core inflation proved sticky, the labor market stayed unusually resilient, and the Fed kept raising short-term rates well into the summer of 2023. On top of that, the regional banking stress in March 2023 (Silicon Valley Bank and others) added volatility that nobody had modeled in January. None of that means the economists were sloppy. It means rate forecasting is genuinely difficult, because it depends on inflation data, employment data, and Fed decisions that hadn’t happened yet when the predictions were made.
How Did the Lock-In Effect Play Out in Montgomery County?
It played out exactly the way I expected, and it’s still playing out today. In that same video, I predicted that even though rates might ease slightly, inventory in Montgomery County would stay low because most homeowners were sitting on ultra-low rates from 2020-2021 and had little incentive to sell and trade into something at 6% or 7%. That’s precisely what happened. Sellers who did list in 2023 tended to be “have-to” sellers, people relocating, downsizing, or dealing with a life event that forced a move, rather than people selling by choice. That kept well-priced, move-in-ready homes competitive even as the broader market cooled, while average or dated listings sat longer and needed price adjustments. If you’re weighing whether now is the right time to sell in this environment, I break down the tradeoffs in myguide to buying a home.
What Does This Case Study Teach Buyers and Sellers Today?
Don’t build your plans around a rate forecast, build them around your own numbers. The 2023 miss is a good reminder that even the most credentialed economists in the industry, backed by real data and real models, can be wrong about the direction of mortgage rates within the same calendar year. If you’re waiting on the sidelines for rates to hit a specific number before you buy or sell, you could be waiting on a prediction that never materializes, the way plenty of 2023 buyers did. What actually matters is whether the payment works for your budget today, whether you can negotiate favorable terms in the current market, and whether the home fits your life. I track current local trends and pricing on mystatspage, and if you want to talk through where rates and inventory stand right now compared to this 2023 case study, reach out through mycontact page.
Frequently Asked Questions
Did mortgage rates go up or down in 2023?
They went up for most of the year. Rates started 2023 around 6.5%, climbed to nearly 7.8% by October, and ended the year still in the high 6% to low 7% range, well above the 5.2% to 5.8% many economists had predicted.
Why were 2023 mortgage rate predictions so far off?
Forecasters expected inflation to cool quickly enough for the Fed to ease up, which usually pulls mortgage rates down. Inflation and the labor market stayed more resilient than expected, so the Fed kept rates higher for longer.
What is the “lock-in effect” I mentioned in the video?
It’s when homeowners with very low mortgage rates from 2020-2021 avoid selling because moving would mean trading their low rate for a much higher one. It’s a big reason Montgomery County inventory has stayed tight.
Should I wait for rates to drop before buying in Montgomery County?
I generally don’t recommend timing a purchase around a rate prediction. This case study shows how often those predictions miss. It’s usually smarter to buy when the numbers work for you and refinance later if rates improve.
Where can I check current mortgage rate data myself?
Freddie Mac’sPrimary Mortgage Market Surveypublishes weekly average rates, andFREDhas the full historical series if you want to see how rates have moved over time.
Rates are unpredictable, but your next move in Montgomery County doesn’t have to be. If you want to talk through what’s actually happening in this market versus what the headlines predict, I’m always up for that conversation.
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Sources and next steps
Verified local sources:Maryland REALTORS housing statistics;GCAAR housing market reports;FRED 30-year mortgage rate series;Maryland SDAT real property search.
Related Kevin guides:home buying guide;relocation guide;book a call.
Watch the YouTube videoorbook a 30-minute strategy call with Kevin.
Expanded local research sources:GCAAR housing market reports;Maryland REALTORS housing statistics;Realtor.com Montgomery County market data;FRED 30-year mortgage rates;Maryland SDAT real property search;Zillow Montgomery County home values;Montgomery Planning development;Montgomery Planning development review;MCATLAS zoning map;Montgomery Planning data catalog;Montgomery County permits;Visit Montgomery travel guide;Visit Montgomery restaurant directory;Tripadvisor Montgomery County things to do.
Contextual links for this video
Kevin site links:home buying guide;market stats;DMV Housing Market 2026: Is a Crash Coming or Are the Numbers Telling a Different Story?;Zillow Just Banned Private Listings — Here’s What Home Buyers and Sellers Actually Need to Know;10 Things You Should Never Say to Your Real Estate Agent When Selling Your Home.
Outside research links for this video:GCAAR housing market reports;Maryland REALTORS housing stats;Realtor.com Montgomery County market data;Reddit discussion search for this topic;Google context search for this video.
Kevin process link: why Kevin’s local process matters.