Newsletter - November 2023
This year delivered some shocking developments most homeowners, investors, and buyers were not expecting to deal with. Mainly the massive increase in interest rates, which are at a 20-plus year high of 8%, sent the housing market into a standstill.
Due to the concurrent record-breaking inflation rates that have been raising the prices of necessities like groceries and gas, many prospective homebuyers dipped out of the buying process as well.
So what can they expect in 2024? Some are saying we are heading for another economic and housing crash while others say that is never going to happen.
Scenario 1: Interest rates and home prices will remain the same causing the market to flatline.
Most experts are predicting that 2024 will be a lot like 2023. Home values will remain up and interest rates within the 7-8% range. Even though the interest rate may drop a bit, it will not be significant enough to massively impact the market. Sellers with a locked-in interest rate will continue to refuse to list their properties while new homebuyers will keep waiting until interest rates drop enough to re-enter the buying game.
“We expect the higher mortgage rate environment to continue to dampen housing activity and further complicate housing affordability in 2024,” Fannie Mae’s senior vice president and chief economist, Doug Duncan, said.
Also, due to the recent fed rate hikes, he does not foresee any additional hikes worsening the situation. The pace of existing home sales will fall below 4 million units in the 4th quarter.
Goldman Sachs also anticipates a troublesome 2024 housing market with interest rates not dipping below 7%, creating record-low home sales not seen since the 1990s.
Scenario 2: Interest rates will drop and home prices will go up causing an influx of activity in the market.
Some realtors are anticipating a drop in interest rates which will cause people eager to buy a home to flood the market. As thousands of families re-enter the home shopping process, home purchasing will become competitive and drive-up home prices. Bidding wars over the few homes listed will push some out while others who have tediously saved for the right moment will win the final sale.
Shark Tank star Barbara Corcoran feels mortgages will eventually drop to the 5% level, and when that happens home prices will rise 10-15%. “This may be the best time to buy a house,” she said. Without the additional stress of getting into bidding wars or paying for more expensive homes, buyers can make offers lower than the listed price and shop without much competition since sellers are eager to let go of properties they no longer want.
Real-estate experts have been forecasting a milder increase in home prices once mortgage rates ease, with a slight boost of about 1%-2%, the National Association of Realtors chief economist, Lawrence Yun, told Markets Insider.
Scenario 3: The economy and home market will crash.
Experts find scenario 3 to be the least likely – some even saying impossible. Although prospective home buyers would certainly benefit from a crash in home values, it’s probably not going to happen says Lawrence Yun, the National Association of Relator’s (NAR) chief economist.
The NAR’s data reveals that median sale prices of existing homes are near record highs. In September of 2023, the median home price was $394,300 with June at the highest of most years at $413,800.
“The housing recession is essentially over,” Yun said. The fact that home values have remained high even at an 8% interest rate signals that no one should expect a crash. The main culprit is the lack of housing inventory. Home prices won’t suddenly become more affordable because there’s just not enough homes available. This scarcity situation keeps homes at a high value. Yun predicts prices will actually continue to rise into 2024.
The International Daily Finance added, “The current market is distinguished from the 2008 housing crash by tighter lending standards, more homeowners having fixed-rate mortgages, and a higher equity level among homeowners, which might provide a buffer against a severe market downturn.”
With buyers still required to maintain a high credit score and a large down payment to offset the higher interest rate, a real estate crash is a pipe dream for families wishing to buy their dream home at a low price and interest rate..,
Employee Of The Month
Congratulations to Kaitlyn for winning Employee of the Month! This is so well-deserved. Kaitlyn has worked at BSD for over 6 years and in that time she’s proven to be one of the most consistent and reliable employees we have. She never misses work, she always strives to hit higher numbers each week, and she’s almost always at the top of the board when it comes to accuracy – it’s common for her to have several weeks in a row with 100% accuracy. She has an eye for detail and likes to make sure everything she does is perfect, and just recently she’s been excelling at learning one of our trickier products. She has been an incredible asset to our Titles department for many years and we’re so grateful to have her on our team. Congratulations on this award, Kaitlyn!