Tis the season for prognostication, and the real estate market is no different. In fact, it’s a market that lots of people like to chime in on, whether they’re in the business or not. Experts, pundits and armchair quarterbacks everywhere reach for their crystal balls to try to portend what the coming year has in store for the market. I’ve been attending webinars and reading a lot about what our industry experts are saying about the coming year. If you do a general search you’ll be overwhelmed with crazy headlines (the sky is falling!), but there are some trends that industry experts are predicting for 2024.
But first, a quick wrap-up on 2023. According to Dr. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), the real estate market nationally saw the lowest sales activity since 1993. Rising interest rates kept new buyers from entering the market, while existing homeowners resisted selling due to having locked in historically low interest rates. Ironically, this lack of inventory helped keep home prices aloft, particularly in the starter home market. Meanwhile, here in San Francisco the median price for a single family home was up 2.3% to $1,535,000 and Condos/ TICs/ Coop properties remained flat at $1,125,000 in November, the latest statistics available. New single family home listings were down almost 36%, but increased 13% for new Condos/ TICs/ Coops listings.
We will have December, as well as full year 2023 stats in mid-January so I’ll be sure to send those out as well.
And now for the 2024 trends forecast::
1. Interest Rates will Fall in 2024:
Dr. Yun predicts interest rates will decrease 3-4 times in 2024, a stance that The Fed seemed to echo in their last meeting. The cuts may not start until Q2 or Q3, but lower rates will rev up buyer demand again, particularly if rates go under 6%. Dr. Yun predicts that they could go as low as 6.5% by Spring and others are predicting they could be below 6% by the end of 2024.
2. The Number of Sellers will Increase in 2024:
As mentioned above, 2023 saw the lowest rate of number of sales in 2 decades. This was due to stabilizing (or decreasing) prices along with many sellers having locked in 30-year fixed rate mortgages at record low interest rates. In other words, seller have been married to the rate, not the house. But life happens. Should interest rates decrease and prices stabilize or grow, expect sellers to pull the trigger in 2024. Consider the many reasons people purchase and sell homes: a job change, retirement, death, birth, marriage or divorce. All of these life changes are still happening and at a certain point, it won’t make sense to hang on as owners have been. Especially if they are also looking for a replacement home and interest rates go down in a meaningful way. People who weren’t willing to move when rates were at 8% will feel more induced to do so at 6%.
3. Sales Overall will Increase with the Largest Group of Buyers Entering the Market:
Today, the average youth leaves home at the age of 26, and on average purchases their first home at 35 years old. These Millenials are about to turn out in the largest group of buyers in the U.S. ever. In 2024 it’s estimated that there will be 45 million such potential buyers entering the real estate market. This bodes well for sellers for the coming year as so many buyers competing for few listings will certainly raise prices.
Don’t expect all of this to happen on January 1. As Fannie Mae’s research arm stated, expect “meaningful but slow” recovery. Still, most experts are predicting at least a bit of recovery after a rather turbulent 2023.
Sources: For this data I referred to several sources, including the National Association of Realtors, California Association of Realtors, Fannie Mae’s Economic and Research Group, and the Brian Buffini Bold Predictions for 2024 webinar.