Ushering in 2024, a wave of promise and opportunity envelopes the air, enticing Arizonans with the prospect of a fresh beginning. This year marks not only the dawn of a possible new job or new home, but also witnesses an explosion of a thriving economy welcoming diverse businesses, spanning from medical devices to agricultural technology, and modular housing to Research & Development as well as a direct flight to Paris, France.
The prevailing sentiment is one of abundance, with a plethora of job opportunities and a noticeable uptick in wages. I’d say we are successfully navigating the employment market.
Exciting Real Estate Prospects for Buyers and Sellers in 2024
The real estate market witnessed a considerable decline in 2023 as a result of a significant number of potential home buyers and sellers deciding to remain on the sidelines, and home sales experienced a slowdown. This downturn was a consequence of the Federal Reserve's decision to raise interest rates in 2022, which contributed to a noticeable decrease in the real estate market that had not been seen since the 2008 recession.
The outcome of this challenging situation was that aspiring homebuyers from a whole generation were unable to afford their dream homes, and existing homeowners clung to their low-interest pandemic-era mortgage rates, thereby causing a marked decline in property listings.
Despite this grim situation, the Federal Reserve's recent announcement that interest rates would be put on hold, with the possibility of a 0.75% rate cut in the coming year, offers a glimmer of hope. While mortgage rates are not an exact reflection of the federal funds rate, there is a possibility that they may also decline, resulting in more affordable home loans.
As a result, the real estate sector is poised to witness renewed vitality. The key to success for both home buyers and sellers lies in utilizing the local insights offered by a real estate agent and remaining adaptable and flexible to the changing circumstances of a dynamic market.
Insights into Residential Property Values in 2023 and Beyond
Despite the looming threat of rising mortgage rates, the housing market is showing unexpected resilience as residential property values are predicted to remain stable. This optimistic projection for the housing market is particularly surprising given that mortgage rates are expected to approach 8%. Potential home buyers who had hoped for a decline in home prices have been disappointed, as property values continued to increase in 2023.
The traditional relationship between rising interest rates and a decrease in demand, and ultimately home prices, does not seem to be holding. Mike Simonsen, of Altos Research, attributes this phenomenon to the current housing shortage that is causing a delicate balance between low demand and low supply.
While analysts project that this equilibrium will continue to support home prices through 2024, there is some variation in their predictions. Some experts anticipate a modest decrease in median home prices, while others predict conservative growth. Despite the differing opinions, there is a consensus that mortgage rates will play a significant role in determining property values. A decline in rates could lead to an influx of buyers and potentially drive home prices even higher.
Given the current stability of the housing market, now may be the perfect time for financially prepared individuals to explore the market and purchase a home. Slower markets, like the current one, often provide the best opportunities for finding bargains and facing less competition. For those considering selling their homes, this may also be a favorable year to capitalize on equity gains and benefit from reduced competition. To make an informed decision about the optimal time to buy or sell, reach out to our team for guidance and expert advice.
Anticipating a Decline in Mortgage Rates
Positive developments are on the horizon for the real estate market as mortgage rates are expected to undergo a downward trend. This bodes well for 2024 as the weight of high mortgage rates appears to be easing. The Federal Reserve has expressed optimism for a rate cut, projecting a decline in mortgage rates. This sentiment is echoed by analysts, including Freddie Mac's Chief Economist Sam Khater, who anticipates a gradual thawing of the housing market.
Already, the average 30-year fixed mortgage rate has retreated from its peak of 8%, and projections from various organizations indicate a continued downward trajectory, with rates potentially nearing 6% by the end of 2024. However, it is important to note that the era of 3% rates is unlikely to return anytime soon. Greg McBride, Chief Financial Analyst for Bankrate, reminds us that as long as the economy continues to do well, higher rates will be the new normal.
Despite this, the decrease in mortgage rates provides a golden opportunity for prospective homebuyers to secure a more budget-friendly monthly payment. Acting before the market rebounds could result in securing an especially advantageous deal. It is crucial to compare lenders to find the most favorable rates, and we can refer you to a mortgage broker who can guide you through the process.
Sellers can also benefit from lower interest rates as reduced buyer barriers to entry may result in more favorable offers. In this evolving market, we can assist you in maximizing your home's sales potential. Don't miss out on this chance to make the most of the positive developments in the real estate market.
The Impact of Declining Mortgage Rates and Housing Supply Challenges
In the past few years, high mortgage rates have dampened the enthusiasm of potential home buyers and caused delays for those reluctant to trade their existing mortgages for higher-interest loans. As a result, the real estate sector has experienced a significant slowdown, with Chief Economist Lawrence Yun predicting a decrease of 18% in existing home sales last year, following a 17% decline in 2022.
However, a decrease in financing costs has generated anticipation of a sales volume resurgence. Chief Economist at CoreLogic, Selma Hepp, emphasizes that lower mortgage rates are expected to boost home sales activity in 2024, encouraging more sellers to enter the market and increase inventory.
Interestingly, evidence suggests that the patience of potential home buyers may be wearing thin. According to a Bank of America survey, the number of buyers willing to wait for prices or mortgage rates to decrease over six months dropped from 85% to 62%.
For those considering a home purchase, the recommendation is to act before the competition intensifies, as pent-up demand may increase with declining mortgage rates. On the selling side, it's important to be proactive as an increase in listings could make it difficult for your home to stand out. Contact us for help navigating this ever-evolving real estate landscape, whether you're buying or selling.
"If buying a home is your goal and within your budget, the best time to buy is when you’re ready financially and you can find a home that fits your needs."
Matt Vernon, Head of Consumer Lending at Bank of America
Will the housing supply increase this year?
Conflicting views abound regarding the state of the housing market. While Realtor.com predicts a potential 14% decrease in inventory this year, there is a continuous dearth of new construction exacerbating the shortage of existing homes for sale. Single-family housing starts are set to decline by 11.2% in 2022 and 10.3% in 2023, further fueling the housing supply gap.
“Pent-up sellers cannot wait any longer. People will begin to say, ‘life goes on.”
Chief Economist Lawrence Yun of the National Association of REALTORS® (NAR)
While new construction plays a critical role in addressing the shortage, it alone cannot fully bridge the inventory gap. According to Mark Fleming, Chief Economist at First American Financial Corporation, there is currently a shortage of approximately one million homes in the US, which can only be addressed when individual homeowners re-enter the market as both sellers and buyers.
In such a tight inventory market, the assistance of a real estate professional is essential for buyers. Our extensive network can provide access to off-market and pre-market listings while also assisting in exploring both new and existing homes in the area.
Sellers still benefit from the low-inventory environment, but they should be prepared to compete with new homes. Our team offers support in preparing your property for the market and highlighting features that will appeal to today's buyers.
Your Guide Through the Real Estate Landscape
A local perspective is of utmost importance when it comes to real estate. Although national forecasts provide a general overview, the intricacies of the market are deeply rooted in the local setting. As experts with a deep understanding of the local market, we have valuable insights that uncover the factors that affect sales and shape the value of homes, especially in your neighborhood. We are here to offer you a nuanced understanding of the real estate landscape in your area.
Consider us your unwavering companion on your real estate journey. We are constantly attuned to the dynamics of the local market and are dedicated to guiding you through its twists and turns. Our mission is to ensure that you make well-informed decisions that align with your unique real estate goals.
If you are considering buying or selling a home in 2024, don't hesitate to reach out to us. We invite you to schedule a free consultation with us, during which we can collaborate to create a tailored action plan designed to meet your specific real estate objectives.
The information above is opinion-based and provided for informational purposes only. It does not constitute financial, legal, or tax advice. For personalized advice suited to your individual needs, consult the appropriate professionals.
Sources:
- ABC News: https://abcnews.go.com/US/millennials-priced-homeownership-feeling-pressure/story?id=105032436
- Bank of America: https://newsroom.bankofamerica.com/content/newsroom/press-releases/2023/12/bofa-report-shows-fewer-prospective-homebuyers-willing-to-wait-f.html
- Bankrate: https://www.bankrate.com/real-estate/housing-market-2024/
- CBS News: https://www.cbsnews.com/news/interest-rates-are-paused-heres-why-thats-good-news-for-homebuyers/
- CNN: https://www.cnn.com/2023/10/19/homes/existing-home-sales-september/index.html
- First American: https://blog.firstam.com/economics/whats-the-outlook-for-the-housing-market-in-2024
- Freddie Mac: https://freddiemac.gcs-web.com/news-releases/news-release-details/mortgage-rates-drop-below-seven-percent
- Goldman Sachs: https://www.gspublishing.com/content/research/en/reports/2023/10/23/2d814362-a656-4cb3-8586-bea8591188e3.html
- Greater Phoenix Economic Council: https://www.gpec.org/news/page/2/
- National Association of REALTORS®: https://www.nar.realtor/newsroom/nar-chief-economist-lawrence-yun-forecasts-existing-home-sales-will-rise-by-15-percent-next-year
- NerdWallet: https://www.nerdwallet.com/article/mortgages/2024-homebuying-trends-property-line-november-2023
- Realtor.com: https://www.realtor.com/research/2024-national-housing-forecast
- Phoenix Business Journal: https://www.bizjournals.com/phoenix/feature/crane-watch
