Skyrocketing interest rates through most of 2022 put some much-needed pressure on the housing market after home prices hit record highs across the nation. However, since December, mortgage rates have been on a steady decline during the first month of the new year.

Even so, many economists remain mixed about whether home prices will continue to decelerate throughout 2023—or even drop at all. For one, the nation’s overall housing supply remains limited, as those who purchased homes in recent years at extremely low mortgage rates are staying put. In addition, new home construction fell again in December, adding to the longstanding inventory problem.

Tight inventory has kept prices from substantially dropping off, making homes still unaffordable for many, especially first-time homebuyers. Yet, even though home prices remain high year-over-year (YOY), they’re not as eye-popping as they were in early 2022. But how far home prices dip in 2023 will likely depend on where mortgage rates go.