New Year 2024
We have turned a page to 2024, and with it, a corner in the real estate market.
In the United States, the 2023 market was stagnant, frozen, and confused. It wasn’t great for buyers, sellers, or agents. But thankfully, the worst is behind us and the future looks bright.
The most recent data shows that the lock-in-effect, whereby homeowners are hesitant to sell homes tied to ultra-low rates, has likely peaked, indicating that new inventory has begun to filter into the market, balancing supply & demand and thus increasing interest, affordability, and competition. Although purchase applications remain about 17% lower than a year ago, we can look forward to increased transaction volume in the coming months.
As new listing options increase (in fact, November showed a gain of 5% y/y according to realtor.com), and rates decrease (the 30-year is down well over a full point from the Fall highs), existing home sales are expected to climb. As agents, we have been busy with showings, but offers have been slow to manifest. Throughout 2023, buyers were faced with the continuous headwinds of sustained prices, high rates, and minimal selection. With at least two of those challenges softening, the power dynamic between buyer and seller has reset and the opportunity for deal-making abounds.
Due to the low resale inventory available through 2023, new construction increased to approximately 1/3 of total single-family inventory, when historically it only accounted for 10%-15% of available homes. We expect new construction to continue to show favor, but not in the extremes experienced over the past year.
Irrational exuberance is also thankfully behind us, as home price growth has stabilized, currently sitting at 4.8%; close to the 4.4% y/y average.
We must reiterate that real estate is local, and shifts in home prices vary greatly pending geography, as shown by the chart below. The Southwest and Western US has seen the greatest pullback in prices; which have reached -10% y/y in some cities, whereas the historically more affordable Northeast and Midwest have seen the most price appreciation as many searched for a lower cost of living to combat inflation. We expect to see seasonality become more influential, however, as the Southeast welcomes snowbirds from colder climates who have been renting for prior seasons, waiting for the ‘right time’ to buy.
EXPANDING ALWAYS, IN ALL WAYS
2023 was time for aggressive deal makers to take advantage of fear in the market and scoop deals. Early 2024 will present an opportunity for savvy buyers to take advantage of low hanging fruit before transaction volume picks up following expected Fed rate cuts. Mid-2024 will bring the stability needed for the vast majority of buyers to make offers.
GLOBAL PREDICTIONS
· A.I. disruption will focus on buyer-product alignment
· Loan rates will decrease but stay north of 5.5% for the 30-year fixed
· Price growth will stabilize at historic average levels (4.4%)
· Transaction volume will increase y/y
· Office-to-residential conversions will be center stage for urban developers
· Many of the 2,000,000 licensed real estate agents will fail to renew their licenses due to changing industry dynamics. The remaining agents will represent the strongest of their peers.
· International deals will disrupt more traditional, local deal flow
