It’s hard to believe we will soon be saying goodbye to 2023 and hello to 2024. As it happens at the end of every year, there are a lot of predictions about how the real estate market will play out in the new year. Much of the speculation centers around buyers, sellers and interest rates, and the prominence of all three in the market next year.
Prediction #1 – Buyers will return to the market.
Buyers had a tough time in the market for several years; they faced shrinking inventory, fierce competition, and highly inflated prices during the low interest rate environment. Then, when interest rates started to shift higher, buyers felt a little relief with less competition and more leverage in a negotiation. However, rising interest rates impacted buyers’ buying power and, as a result, many buyers found themselves sidelined completely, no longer able to afford the homes they previously considered. Now that interest rates have started to decline, those sidelined buyers are ready to get back into the market, and after the new year those buyers will be ready to go.
“Serious first-time homebuyers should consider jumping into the market as soon as February, while the market remains quiet,” said Lautz, deputy chief and vice president of research at the National Association of Realtors. “Lower rates may breed competitive bidding wars among strong buyers, so now may be the time.”
Prediction #2 – Sellers, and inventory, will return to the market.
The high interest rate climate also impacted sellers. They saw their buyer pools shrink or disappear, and their homes began to sit on the market for longer. Other would-be sellers decided to wait to list their homes; while they wanted to move, they were reluctant to give up their own low interest rates for a more desirable home but with a much higher interest rate. Now that interest rates are decreasing, those sellers are also ready to go, with many thinking about listing soon after the new year which will bring increased inventory into the market as well.
Prediction #3 – Interest rates will continue to decrease.
Interest rates hit 8% in October – the highest the market has seen since 2000 – and they fell below 7% for the first time since August. While these rates are still relatively low compared to what interest rates were in the 1980’s, they are astronomical to buyers who have only known interest rates to be between 2% and 5%. At their meeting last week, the Fed alluded to three rate cuts expected in 2024, and that spells good news for buyers looking to finance home purchases in the coming year.
“Fixed mortgage rates should be around 6% by this time next year,” says Moody’s Mark Zandi
Implications – For both buyers and sellers the time to prepare is now.
If the buzz is correct and the speculation materializes, the best thing both sellers and buyers looking to make a move in 2024 can do is prepare early, and early is now. Sellers are going to want to beat their competition to the market and they should start preparing their homes sooner rather than later – declutter and pack away things seldom used, and schedule repairs for things that need to be fixed prior to listing. Buyers will also need to be prepared to compete with other buyers coming back to the market – those who are financing should reach out to their lenders now to get their finances in order and obtain pre-approvals. Advance preparation is crucial for when the market begins to move quickly again, which it is definitely positioned to do in 2024.
Please reach out with any questions about the predictions for the 2024 real estate market or the market in general. And, as always, if you know someone looking to get into the market, please feel free to pass along my name. I’m happy to help them if I can.