New Norms and Better Outlooks for 2024
To catch a glimpse ahead, we first look immediately behind. And the end of 2023 was no surprise. Real estate transactions faced their usual seasonal slowdown. But certainly the most significant decrease in 2023 transactions was due to one main culprit: climbing interest rates.
With last year’s mortgage rates in the 7% range, we saw buyers hesitant to move forward with their home purchases. Sellers too were slow to put their homes on the market, assuming that there are no buyers looking.
And indeed, current home owners/potential movers are mostly staying put, clinging to mortgage rates well under 4% (some even under 3%). This population is the most unlikely to contribute to real estate transactions in the near future, unless, of course, a life event dictates a necessary move.
So who’s doing well in this market? First time buyers.
We see incentives galore for this population of buyers, with small down payments and creative high-rate, off-set solutions. Additionally, with lower buyer demand and anxious sellers, for the first time in a long time buyers have greater breathing room in which to conduct their home search. The frantic multiple offer situations of the last few years have not disappeared completely, but they are certainly occurring at a much less frequent rate.
Eager to sell their homes in what they consider a difficult market, sellers are also more likely to accept inspection and financing contingencies, both of which offer a safer environment for the novice buyer to purchase a home.
Buyer attitudes are starting to change for the better.
As rates have moved below 7%, there’s been some renewed buyer activity—a very promising sign that people are in fact tired of waiting, and are ready to get on with their lives. It also suggests an adjustment to higher rates and very possibly, a belief that rates may remain high for some time.
Finally, life moves on. And that moves real estate.
Regardless of macro developments in the greater economy, most real estate transactions are about life events, some happy – marriage, birth of a child, promotion, etc. And some not so happy – divorce, death, illness. Life doesn’t stop just because mortgage rates are high. What I see is an impatience amongst clients and a resolution to get off the fence, and on with those necessary lifestyle changes.
In summary, I predict a healthy 2024 real estate environment with an overall adjustment to our new norms. Inventory will remain at lower levels and if buyers become more comfortable with current conditions and demand increases again, it’s going to be an active market for all.
