2023 Review… and 2024 predictions
December is the month for reviews and predictions. There’s no crystal ball in real estate… but we have some thoughts on how things went this year and how they are looking for next year.
2023 Review
1. No more buyer frenzy. Where did all the buyers go? Well, with rates peaking at 8% and an uncertainty about a recession (did we have one or not??), the number of homebuyers shrank considerably from the previous year. For the people who did buy a home in 2023, this likely meant no bidding wars, they didn’t waive contingencies, but they probably compromised on size or location of their home purchase.
2. Highest mortgage interest rates in 20 years. Yep, records were set. Even though 8% is an historic medium-level rate (remember 18% in the 80s?), the quick climb of interest rates was enough to make many potential home buyers pause.
3. Commercial real estate industry faces unknowns. Employers instituted “return to office” policies this year, but the effect was minimal and pushback was high. Also, some companies are realizing that the overhead of office rent may not be worth it, as their employees are just as effective working from home. This uncertainty in return of office work has lead to higher office vacancies and slower rent growth.
2024 Outlook
1. Rates are lowering. As of today, FHA and VA loans are below 6.9%, and 30-year conventional loans are right at 7.0%. Most predictions have rates staying in the 6-7% range through Spring 2024.
2. Inventory remains low. Did you know that 40% of U.S. homeowners have no mortgage? Half of these homeowners are at retirement age with no plans to leave their home in the near future. This means that most inventory will come from those who have to sell (estates, job relocation, divorce, etc) or from new construction.
3. New construction increases. With lowering interest rates, builders feel more bullish about building and will take advantage of more favorable rates. In November, Lawrence Yun, chief economist at National Association of Realtors, said “Builders are back on their feet, up 5% in newly constructed home sales year to date.” Which means that these new housing units, along with ones that will start construction in January, will put more inventory in the market in 2024.
What real estate trends did you observe in 2023, and what are your predictions for 2024?