As we find ourselves in the midst of an election year, the real estate market is presenting a dynamic landscape that is challenging to predict. However, thanks to our friends at Empire Title, and specifically Bill McAfee and his monthly market updates, we have a few thoughts we would like to share with you as we really get into the groove of 2024.
Here are key insights from the market trends we saw closing out 2023 and future predictions for the real estate market in 2024:
1. Election Year Uncertainties:
The ongoing election year adds an extra layer of complexity to forecasting the real estate market's trajectory. The political climate can influence economic policies, impacting the direction in which the market might move.
2. Rental Market Expectations:
Anticipations are high for a decline in rents this year, primarily attributed to the surge in multifamily unit constructions. This influx of new rental properties could potentially alleviate rental costs for tenants.
3. New Inventory Dominates:
The majority of homes entering the market are not resale properties but newly constructed units. Homeowners with low mortgage rates are opting to retain their current homes as rental properties while acquiring new houses, contributing to the rise in new construction.
4. Shifts in Residential Price Dynamics:
A comparative analysis between 2022 and 2023 reveals a 1% increase in the average price of single-family residential properties. However, the median price experienced a slight dip of 0.6%. The slight decrease in prices is still not enough to offset the increase in interest rates, so buyers are sitting on the sidelines because they are still not able to buy as much home as they could a few years ago.
5. Low Listing Numbers and Sales Volume:
Over the last three months, there has been a decline in the number of listings, a typical seasonal pattern. December 2023 witnessed a notably low sales volume of 777 homes sold, the lowest in eight years, mainly influenced by rising interest rates.
6. Continued Seller's Market:
Although we are still in a seller's market, the dynamics have evolved. Proper pricing and good property condition are crucial for a successful sale, contrasting the swift sales observed in previous years.
7. Inventory and Market Predictions:
The number of homes listed remains below the normal range, emphasizing the scarcity of available properties. As we get into 2024, we are still seeing a lack of listings, making buyers' selections slim.
8. Interest Rate Considerations:
Mortgage interest rates may experience a slight reduction this year because it is an election year. This adjustment could impact borrowing costs and potentially influence buyer behavior.
9. Demographic Sales Insights:
An overwhelming 79% of home sales within the last 12 months fell within the price range of $300,000 to $749,000. The most popular price range in our market appears to be the $400,000 to $499,000 range.
10. Impact of Interest Rate Fluctuations:
Over the past eighteen months, interest rates have skyrocketed from 2.28% to 6.62%, resulting in a 33% decrease in purchasing power, equivalent to approximately $166,000. An example would be if a buyer could previously qualify for a $500,000 house at 2.28%, at an interest rate of 6.62%, now they would only be able to qualify for closer to $334,000. That's a huge reduction in buying power and another reason why buyers are reluctant.
11. Days on Market Realities:
The market has shifted from an unrealistic six days on the market to a more sustainable 46 days on market. We are noticing as we begin 2024, we are probably going into a more normal market duration of 50 to 60 days on market.
12. Median Sales Price and Inventory Challenges:
The scarcity of inventory is a significant factor in maintaining the median sales price at $466,461. Sellers should be mindful of these inventory challenges when setting their expectations on the value of their home.
13. Rise in Cash Buyers:
We are seeing more cash sales than ever before. This noticeable increase in the percentage of cash buyers emphasizes the importance of financial readiness in the current market. If you are thinking of buying, you should get prequalified and see what you can qualify for without selling your current home and/or taking equity out of your present home so that you can pay cash for a different home.
14. Return to a Balanced Market:
The real estate market is gradually returning to a more balanced state, signaling the need for sellers to adopt realistic expectations in their property transactions.
As we navigate through the intricate dynamics of the real estate market in 2024, staying informed and adaptable will be essential for both buyers and sellers in making sound decisions in this ever-changing environment.
Have market questions or want to outline a plan to buy or sell a home? Don't hesitate to reach out to the team at Harris Group Realty!
Keep reading other bits of knowledge from our team.
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