Crystal Ball Forecast of Real Estate Market for 2024

The real estate market in the U.S. is expected to record the lowest number of sales in 2023 since 2008. Despite a slowdown last year, it did not mirror the conditions of 2008. Unlike back then, the market maintained a steady pace in 2023 due to robust buyer demand. In 2008, there was an excess of 2 years’ worth of inventory, while last year saw a shift from less than 1 month to nearly 2 months of inventory. Consequently, about one-third of the market faced multiple offers, favoring sellers but posing challenges for buyers.

Where is the market heading

In my forecast for 2024, I anticipate a robust year for the real estate market, supported by several key factors. Here are the main three reasons behind my prediction:

1. Strong Buyer Demand: The continued strength in buyer demand is a pivotal factor. A significant driver of this demand is the large number of individuals in the prime household formation phase of life. With 72 million millennials, the highest in history, entering this phase, where household formation typically begins at 26 and the prime buying years for first-timers are now between 33 and 35.
2. Pent-up Seller Desire to Move: There is a considerable pent-up desire among sellers to make a move. While many Americans appreciated low interest rates, they may not necessarily be satisfied with their current homes. The pandemic years prompted some to delay their moves, but life has progressed. Over the past two years, there have been almost 3 million marriages, 1.5 million divorces, 7 million births, and 7 million boomers turned 75—indicating a time to downsize. Additionally, there were 50 million job changes, and increased remote working opportunities offer flexibility. Some sellers delayed their moves to avoid giving up their 3% interest rates for higher rates, but as rates gradually decrease, even 6% seems like a favorable option.
3. Declining Interest Rates: Interest rates are finally on a downward trend, with predictions suggesting a continued slow but consistent drop over the next 12 months. This convergence of factors—strong buyer demand, pent-up seller desire to move, and declining interest rates—indicates better days ahead. It’s reasonable to assume that we are at the bottom of the trough, and a closer examination of underlying benchmarks will provide further clarity on the evolving real estate landscape.

Incites into interest rates

The narrative of the real estate market over the past two years has been dominated by the trajectory of mortgage interest rates. Experiencing a notable 5% increase since the conclusion of 2021, this upward swing prompted many prospective buyers to temporarily halt their home search. However, there is now a glimpse of relief in sight.

In comparison to rates nearing 8% in the Fall of 2023, the current situation sees us enjoying mid-6s, which, considering the two-year climb, feels relatively manageable.

According to most industry experts, the consensus is that rates will continue to decrease over the next 12 months, as indicated by the Mortgage Bankers Association (MBA).

As interest rates become more favorable for buyers, the expectation is a return of buyers to the market. Simultaneously, sellers who have been cautiously observing from the sidelines are likely to start testing the waters.

Sellers are acknowledging that the current value of their homes may be at its peak, and 2024 could be an opportune time to leverage their equity. Strong price appreciation during the pandemic years has resulted in most homeowners having record-high market values and significantly more equity than pre-pandemic times. Approximately 70% of homes are either fully paid off by the owners or have at least 50% equity.

What this means for sellers and buyers

The statistic reveals that 68.7% of homeowners have either paid off their mortgage entirely or possess at least 50% equity in their homes, according to data from FHFA, Census, and ATTOM.

This unprecedented level of equity presents a golden opportunity for sellers to upgrade their homes. Sellers can leverage their additional cash to either make a larger down payment to mitigate higher interest rates or pay off other consumer debts carrying higher interest rates. Regardless of the chosen approach, it’s possible for overall monthly expenses to decrease, even if mortgage rates are higher on the new house.

The anticipated increase in inventory is expected to have a substantial impact and contribute to a robust Spring market. The advice for sellers is to outpace the market by listing in February or March, strategically getting ahead of the Spring rush that is likely to bring heightened competition. By taking advantage of the ongoing low inventory, sellers can maximize their home prices and position themselves favorably in negotiations.

Buyers are also encouraged to take proactive measures. Getting pre-approved early and commencing the home shopping process before the traditional Spring rush can provide a competitive edge, as there will be less competition for desired properties.

This is considered an opportune time for careful consideration when selecting a lender. Many local lenders are offering incentives, including a “free” refinance when the expected rate drop occurs, creating a mutually beneficial situation.

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This insightful post was crafted by John Womeldorf, also known as Mr. Williamsburg. With over 20 years as a local Virginia real estate agent and a deep family history in the area, John brings a wealth of knowledge and passion for helping individuals find their perfect home in Williamsburg or the surrounding areas. Explore more on mrwilliamsburg.com, a comprehensive and informative website that reflects John’s dedication to the community. 

Whether you’re considering a move or looking to sell, John is your go-to guide, offering valuable advice and a network of reliable contractors for your real estate journey. 

Connect with Mr. Williamsburg for a seamless experience in making Williamsburg your home!

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