The dominant theme in 2023 housing market headlines revolved around the surge in interest rates, but it’s essential to acknowledge that market dynamics are shaped by a multitude of factors. Staying informed about the housing market is crucial for property owners, so let’s take a look at what economists are predicting for 2024.
This year will be neither a buyers’ nor a sellers’ market, but we think that the market will continue to tilt in favor of buyers with lower rates and more inventory as sellers get tired of waiting for rates to drop.
Many reports predict the “lock-in” effect to subside, and we agree. The lock-in effect refers to people who don’t want to sell their current home because they locked in long-term payments when rates were near all-time lows. We are seeing more homeowners warming up to the idea of borrowing at the current rate and listing their homes for sale, as they realize the historically low rates of 2021 aren’t returning. This will help increase housing inventory.
Predicting how mortgage rates will move is a nearly impossible task, but it’s fair to say economists are optimistic that the Federal Reserve is done with its rate-hiking campaign. It is likely that we will see interest-rate cuts this year in response to a slowing US economy. While it may be challenging to muster excitement for gradual rate reductions following the historic lows, it’s essential to consider that even a 1% decrease can result in substantial savings, potentially amounting to thousands annually.
One shift we saw in 2023 was an increase in days on market (DOM) by 23% year over year. Inventory remained low last year so we attribute this increase in DOM to high costs limiting the number of active buyers in the market. While that number may sound high now, it’s actually just a return to pre-pandemic market conditions and is still lower than the five year average.
Our biggest hope for the market this year is improved affordability and conditions for first-time homebuyers. Home prices have continued to rise, propped up by low inventory, so the goalposts for amassing a down payment keep moving. When you throw in higher interest rates, many feel that homeownership is out of reach. Getting on the housing ladder is important to begin building equity and net worth, and if owning a home is a goal you have, we would love to help you no matter the timeline.
It’s worth noting that there will always be a demand for buying and selling real estate, and with a skilled agent by your side, you can succeed in any market. No matter what your real estate aspirations may be for 2024, we’re here and eager to assist you in achieving them!