New Year Offers Optimism

As the clock struck midnight and we closed out 2023, thoughts have shifted to the new year and the promise of a better real estate market. With so many views on what is happening in the market we wanted to share some of our thoughts on the way we see the 2024 real estate market.

In 2024, there is no indication of a housing bubble. Despite some individuals expressing concerns about a potential bubble, we firmly reject this notion as both absurd and implausible. While we anticipate ongoing price growth and an increase in mortgage rates from the pandemic era, these are the only changes we foresee.

Mortgage rates are anticipated to decrease gradually, with experts predicting a year-end rate of around 6%. We find this to be a reasonable projection. Contrary to fears of rates surpassing 8%, the Federal Reserve's plan to implement at least three cuts next year should allay such concerns. The pertinent question, in our view, is not whether rates will fall but the speed at which this decline will occur.

Listing activity is expected to see a modest increase, influenced by the lingering effects of the rate-locked phenomenon into 2024. Currently, approximately 80% of mortgaged U.S. homeowners have rates at or below 5%, explaining their reluctance to sell. However, as rates drop within 1.5% of their current rate, some homeowners may be motivated to put their properties on the market.

Home prices are projected to experience a modest 1% growth next year, a forecast we find reasonable. In essence, home prices are expected to either maintain their current levels or grow by a marginal 1%.

The recovery of home values in previously struggling markets is challenging to predict. Real estate's cyclical nature suggests a likely recovery, but given the unprecedented activities during the pandemic, concrete predictions are difficult. Monitoring these markets closely will provide insights into the accuracy of this forecast.

New construction is poised to gain market share, supported by homebuilders offering incentives such as below-market mortgages and rate buy-downs. This prediction, akin to trends observed in 2023, suggests that buyers will find the best deals in newly constructed homes.

Housing affordability is anticipated to remain relatively stable. Contrary to some experts who predict worsening affordability, we expect housing prices to either remain unchanged or grow by approximately 1%, coupled with a drop in mortgage rates, contributing to stable affordability in the coming year.

The U.S. Government's continued attention to housing is deemed crucial. To address housing affordability concerns, cities and counties must ease restrictive land use policies, streamline permitting processes, and reduce fees imposed on builders. These steps are essential to alleviate additional financial burdens on homebuyers.

Foreclosure activity is not expected to significantly impact the market, distinguishing the current situation from the 2008 housing crisis. While foreclosure starts have increased, they remain well below pre-pandemic levels. Anticipated rises in delinquency levels in 2024 are viewed as a return to the long-term average and not a cause for major concern.

Home sales are projected to rise marginally in 2024, with sellers holding the advantage due to high demand outpacing supply. We anticipate a slight increase in the number of home sales, potentially reaching 4.07 million, reflecting a 0.1% growth.

If you have been waiting for the real estate market to improve before you purchase you home, the improving conditions are a sign that now may be the time to reconsider looking more seriously.

We would love the opportunity to discuss your goals for 2024 and see how a new home fits in those plans. Please contact us today.