The real estate market has undergone significant transformations over the past few years. I believe these shifts can be condensed into three pivotal periods:
- The 2020 Effect: The market's gradual momentum by the end of 2019 was eclipsed by the impact of COVID-19. A surge in home-buying ensued due to low inventory, substantial divorce rates, remote work arrangements, and government subsidies, leading to soaring home prices.
- Mid-2022 Mortgage Rate Challenge: Around mid-2022, the market cooled as mortgage rates spiked. According to Freddie Mac's data, the average 30-year rate surged from 3.22% in January to 7.08% by October 2022, a nearly 400 basis points (4%) increase in just ten months. This played a pivotal role in causing buyers to pause and had a far-reaching impact on the housing market.
- Early 2023 Inventory Impact: In early 2023, the Federal Reserve's efforts to curb inflation led to escalating mortgage rates. This sudden rate increase unexpectedly affected inventory, as homeowners with low mortgage rates hesitated to sell. Consequently, new listings dwindled, intensifying buyer competition due to inventory shortages.
But what's on the horizon for the housing market in 2024?
The third shift will heavily influence the upcoming year, marked by dwindling inventory, accelerated home sales, and upward price pressure. The nationwide "cooldown" phase is drawing to a close, giving rise to intensified buyer competition and projected price increases in the latter part of 2023.
Looking ahead to 2024, I foresee the following:
- Sustainable Price Growth: Home prices will probably rise more than they did in 2023, but in a more sustainable manner. The unsustainable rapid growth experienced earlier necessitated a market correction.
- Varied Market Experiences: While not universally applicable, most markets are poised for price growth. The timing might differ, with many markets potentially rebounding by late 2023 and early 2024, reflecting historical norms.
- Supply Struggles Persist: Low supply levels will continue to pose challenges for homebuyers due to constrained inventory. Years of declining supply, exacerbated by pandemic-induced demand and government-subsidized mortgage rates, play a role.
- Stable Mortgage Rate Range: Mortgage rates will likely remain in the mid-6 to 7% range. Homeowners hesitate to sell due to the anticipation of regular or higher rates. Simultaneously, labor and material shortages have curtailed new home production, compounding ongoing supply shortages.
Overall, the housing market is poised for sustained price growth, supply challenges, and a backdrop of moderate mortgage rates, shaping the landscape in the years ahead. Should the current trends persist (as projected), there's a likelihood of constrained home availability in the coming months, extending the present supply shortage into 2024. This underscores why specific U.S. real estate market forecasts indicate a trajectory of rising prices in 2024. In light of this, while many prospective home buyers remain active, meeting demand might require more homes than the currently available.
DISCLAIMER: These forward-looking writings should be considered as informed personal opinions for entertainment purposes. Neither I nor Kingwood Homes, Kingwood Rental, LLC, nor Any of its associates make any claims regarding future economic or real estate conditions. Making financial decisions based on this or similar content on this webpage is not advisable.
