We blinked, and suddenly, we’re near the end of 2023. The year thus far has been challenging for anyone involved in real estate. Will things change soon? What can we expect as we move into 2024?
Here’s our take, based on what we’ve seen and experienced alongside assessments from Bankrate and Redfin.
What We Expect from the Year-End Market
Decelerating Activity
A sluggish winter market comes as no surprise. This is typical regardless of market conditions simply because sellers and buyers are more occupied with holiday festivities and family. Curb appeal is poorer in winter, and people aren’t as motivated to close. Of course, 2023 saw a dip in buyer activity before Q4 this year due to high interest rates and rising home prices.
Buyers are more inclined to wait for better opportunities and preferred timing. A lack of inventory, already the most significant challenge to real estate market health, won’t improve as sellers hold off on listing. This seasonal market hibernation, however, may pay off for some…
Deals for the Determined
Redfin reports that although home prices continue to grow, sellers are slashing their prices. Many people realize that there’s not the same level of demand on the market that saw the guy down the street getting dozens of above-asking-price offers. Buyers don’t have the budget for it with high interest rates. As a result, some sellers adjust their asking prices and expectations as the market keeps its prices propped up with low inventory.
Demand is diminishing and will grow dormant through the year’s end. Motivated buyers have more negotiating power than they did at the height of market competition. Be on the lookout for reduced prices.
Unwavering Interest Rates
The Fed increased interest rates as a commonly employed strategy to curb inflation and out-of-control price growth. It didn’t really work. Low inventory kept home prices stubborn, which only served to decrease overall housing affordability. These rates aren’t likely to drop in the remainder of 2023. In fact, investors and average homebuyers alike should bid adieu to those coveted 3% rates. They’re not coming back. All we can do now is adapt!
What May Be in Store for 2024
Continued Inventory Challenges
We currently have about 2.5 months’ worth of inventory. Healthy inventory lasts for 6 months. This kind of shortage won’t be solved overnight. We’ve discussed at length how we got here. In many ways, these are the ghosts of the Great Recession, the prolonged aftermath of the most significant market upheavals we’re likely to see in this lifetime.
There aren’t enough builders, and the ones we have aren’t focused on building affordable housing. Inventory skews toward mid and mid-high prices, further knocking homebuyers out of the running.
While we’ll see more listings in the Spring, don’t expect a radical shift in housing supply.
Slight Softening of Interest Rates
Opinions vary on mortgage rates in 2024, but the general consensus is clear: don’t expect an earth-shattering rate reduction. Many experts predict we’ll end 2024 with 30-year fixed rates on the high end of 6%. However, even the smallest increments can mean hundreds of dollars in monthly savings depending on the home price. No matter how marginal the decreases, we expect they’ll reignite housing demand and buyer activity. Competition will increase. With it, so will prices.
Perhaps buying now and refinancing later rather than throwing elbows above the asking price is the better route.
A Market Resurgence
2024 will see a more robust market for a variety of reasons. First and foremost, wage growth is finally outpacing inflation. While this won’t immediately give homebuyers more buying power, it will increase affordability slowly but surely. That buying power will only improve as interest rates decline, even in small amounts.
Here’s the thing investors need to remember: waiting is a gamble. We get the temptation to wait for better interest rates. However, we must also be realistic about what will and won’t happen in real estate. We’re not going to return to 3% rates. Home prices won’t see a significant crash with these inventory levels.
If you’re waiting for the other shoe to fall, you may be waiting a long time. And that time is money and missed opportunities. So here’s our advice: keep moving forward. Capitalize on this sluggish market. It’s too easy to write it off, but opportunities await those willing to dig down and look.
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