Top 5 key indicators:
The real estate market outlooks present diverse perspectives on key indicators such as home prices, mortgage rates, sales, inventory, and broader economic influences. A comparative analysis reveals common themes and areas of divergence. And in typical fashion, we are breaking them down for what it means to our homeowners and future home buyers as we begin 2024.
#1
Interest Rates will continue their gradual decline which started in December 2023 and likely end the year under 6%. While most real estate sites only see rate improvement into the low sixes, we are already benefiting from easing inflation and seeing those with a number of lenders. Therefore, with the Fed anticipated to cut the Fed Funds Rate by 75 bps, this will support a continued softening of the mortgage rates. We may already be experiencing the market responding to the first anticipated rate cut with today’s available mortgage rates but will likely see 5% interest rates this year, and when the news gets out, watch out for a flurry of buying.
Mortgage rates climbed for most of 2023, reaching nearly 8%—a level not seen in two decades. Though a far cry from the double-digit highs of the 1970s and ‘80s, for hopeful buyers, those rates crushed affordability. And for every 1% drop in rate, 5 million more people can meet the requirements to buy, which brings us to our second prediction for 2024.
#2
We anticipate a modest rise in home prices in 2024, rebounding from temporary weakness in late 2023. It appears likely modest national appreciation will be the result of divergence among regional price trends this year. In a recent cross-market demand study, they reported pent-up buying interest in markets including Raleigh-Durham, which may mean the Triangle will enjoy out-sized returns compared to other markets. The median resale home gained +5.6% in 2023, and 2024 pricing should continue along a similar trajectory.
#3
Inventory challenges will persist, although we will see a modest rise in listing activity in 2024. Homeowners will finally bite the bullet this year and more seriously consider selling. Having continued to wait for softening prices, and watch interest rates rise and fall, many will yield and decide life changes finally dictate a move. But resale homes won’t resolve the supply issues. With household formation at roughly 2 million per year, we will have a continued gap in inventory, with new home construction only producing 1.4 million units per year, leaving an imbalance that will result in persistent supply issues and help to raise or keep prices stable in strong markets.
#4
Income gains will start to help offset affordability concerns as price increases stabilize and fall in line with historical norms and further ease buyers into 2025. We have seen a rise in the average age of our first-time home buyers in recent years, but if real estate appreciation normalizes as anticipated, we will start to see that shift again with the help of more supportive programs.
#5
Overall housing sales will increase in 2024 as a result of the aforementioned expectations, but the industry will continue to shift as buyers will expect a higher level of service and expertise from their agents. NAR anticipates a rise of 13.5% in existing home sales with the help of new construction homes becoming available to meet demand but negotiations will become more fierce and require more from sellers as we muddle through a reversion to the mean. As Odeta Kushi, deputy chief economist at First American Financial Corporation, explained, “The pandemic was too hot; 2023 was too cold. 2024 won’t be just right, but it will be heading in a normalizing direction.”
Home prices have increased 40% over the last 3 years, but looking back, they have also gone up 118% within 6 years and took 59 years to experience a decidedly negative period. Over the last 60 years, the average annual appreciation of homes is 4.5%. Various factors, including geopolitical events and elections, will influence the 2024 real estate market, and despite historical trends showing significant appreciation over longer periods, the market is not immune to fluctuations. However, waiting and attempting to time the market hasn’t been proven to equate to long-term savings.
Always buy well first!
We are excited for a busy 2024 and have a number of homes being brought to the market. If you want to hear more about properties around the Triangle coming for sale, please don’t hesitate to let us know so we can give you details ahead of time.
