What's in Store for 2024? Predictions for the New Year in Residential Real Estate

Hello Hampton Roads,

Whoever coined the phrase, "the only constant is change" must have had the real estate market in mind! All the changes the market has been through lately has kept all of us who work in this field on our toes. From a white-hot market climate sporting high home price appreciation and low mortgage rates in 2021-2022 to a chilling freeze in 2023 — spurred by towering rates and low affordability — the real estate landscape today is set to shift again as we inch towards 2024.

In this post, we'll gaze into the crystal ball and speculate about the future of the residential real estate market in 2024, drawing insights from recent market behabior to economic indicators suchas the Conference Board Leading Economic Indicator (LEI). Ready to find out what's in store for 2024? Let's go!

Did 2023 Give You the Cold Shoulder?: The Freeze of 2023

One of the most notable observations in 2023 is what experts are calling the "Lock-In Effect."  Buyers experienced this as low inventory as many sellers simply chose to stay put.  Last October mortgage rates approached a daunting 8% seriously hurting affordability.  Given that an overwhelming 75% of existing mortgages sat at 4% or less, many sellers chose not to give up their attractive low rates.  

Picture this--as a home owner, you're  enjoying the highest and fastest home price appreciation over the past couple of years on top of a super affordable interest rate of 3%.  With the equity you have, dreams of a larger, more spacious house tickle your fancy, enticing you to consider moving.  But the prospect of losing your low rate to climb to an 8% mortgage bring in the harsh reality of higher costs so you reluctantly make the financial choice to stay put.  

The Dawn of 2024: Change is on the Horizon

Going into the first week of 2024, there are already signs of another twist in the tale--a fall in mortgage rates and an increase in inventory!  Mortgage rates now stand in the 6.6% range and in fact, according to Fannie Mae's  National Housing Survey, many home owners are optimistic that rates will continue to go down.  Those who were previously snug in their "lock-in effect" may start to reconsider their options.   For a quick peak a what's happening in our local market, see the table below:  

Locally the market is still strong with the best homes still selling close to or slightly over list but homes are staying on the market longer and inventory is starting to loosen.

Recession Risks and the Conference Board LEI

Another pivotal factor that could influence the real estsate market in 2024 is the specter of a recession.  While no one wants to hear about a recession, it is part of the normal business cycle and there are tools to help us anticpate the economic downturn.  Arguably one the best indicators is the Conference Board's  LEI.  It takes 10 of the most effective leading indicators and combines them into an index to accurately predict recesions over the last 40+ years.  Check out this video for a great explanation on how it works!

Now you might be asking, "How does a recession impact the real estate scenario?"  Well during a recession jobs become less secure and the cost of living generally increases.  This combination often leads to a drop in home sales since fewer people feel confident in their economic stability to take on a mortgage.  However with every cloud there is a silver lining. For buyers who are financially prepared, they may find themselves in an advantageous position as prices dip. the economic downturn.  For sellers, a more nuanced approach is required--Pricing strategies are paramount and the ability to showcase the unique value of a home becomes a game-changer. 

On the flip side if a recession is averted, the real estate market could experience a robust rebound. Pent-up demand coupled with lower rates could propel the market to new heights.  It becomes a window of opportunity for those who were priced out of market earlier.

To Sum it All Up

The pendulum is swinging from the stagnation of 2023 to the revival of 2024, but the specter of a potential recession looms in the background. For buyers and sellers alike, the key lies in staying informed and agile.  Keep a watchful eye on the every-changing mortgage rates, explore the exanding inventory, and heed the clues provided the economic indicators like the Conference Board's LEI. 

2024 is shaping up to be year of opportunities and challenges.  Whether you are a seasoned home owner or a first time home buyer. the key to success lies in navigation these unchartered waters with knowledge, reslience and a keen eye for the ever-shifting real estate market.  If you are considering buying or selling in 2024, and would like to talk about how to best accomplish your real estate plans, you can schedule a free call here: https://calendly.com/liz-schuyler

Thanks for Reading,

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