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Over the past year, mortgage rates have spiked from 3% to 6% following a fast run-up in home prices mid-pandemic, and those rising rates coupled with still-high home prices led to the worst measurement of housing affordability in more than a decade in December 2022. In fact, according to the Federal Reserve Bank of Atlanta, housing affordability is worse now than it was at any point in the lead up to the housing bubble in 2008, but a number of housing experts say the worst of an affordability crisis may already be behind us.

Researchers at Bank of America expect mortgage rates to fall to 5.25% by the end of 2023, and they’re not the only ones anticipating a slowdown. The Mortgage Bankers Association reported a similar outlook, predicting a year-long cooldown resulting in a rate of 5.3% in Q4 2023, Fortune reports.

How can housing affordability be improved heading forward? There are really only three levers that can help here: Rising incomes, falling home prices, or falling mortgage rates.

But the truth be told, the lever with the best chance of making a difference is mortgage rates. Unlike home prices—which are historically loathe to fall—mortgage rates are volatile and can swing down quickly if financial markets were to loosen. And unlike incomes—which could soften if a recession were to hit—mortgage rates would likely fall if the Fed’s inflation-fight does indeed spur a recession.

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