2023 was a tough year for real estate, especially for industries where a paycheck is tied to the number of transactions.
Mortgage rates climbed to 8% and put the brakes on the market. Rates steadily increased throughout the year until inflation cooled off, allowing the Federal Reserve to slow rate increases and then pause rate cuts.
Many were expecting a housing crash due to the increasing rates and properties becoming less affordable.
After a dip in prices at the end in 2022 and beginning of 2023, we actually saw increases in price as mortgage rates increased.
Low inventory, cash buyers and few motivated sellers kept prices from falling.
Low inventory due to many sellers being “locked in†with low mortgage rates kept most sellers on the sidelines.
2023 felt like a sinking ship for many buyers and sellers. Mortgage rates kept increasing and the number of buyers was shrinking along with the number of offers.
Decreasing inventory and cash buyers kept the market moving along.
What is going to happen in 2024?
2024 is gearing up to be a busy year for real estate.
Rates have already dropped from the peak of 8% into the 6% range. For my personal business, quite a few buyers have either canceled or put their search on pause since rates peaked in the Fall.
As the rates have dropped, many buyers and sellers have reached out, looking to complete transactions they put on hold for 2023.
As rates drop more, buyers will enter the market.
Mortgage rates could drop to the 5-6% range. This will still be above the 2-4% range most homeowners have today and will do little to dissipate the lock in effect.
A large increase in buyer demand and marginal increase in homes for sale will put upward pressure on home prices.
Instead of 2-3 offers we could be back to 5+ offers on well priced properties.
This will depend on the Fed and how aggressively they cut rates. Mortgage rates change faster than the Federal Funds rate, we could have already seen the largest drops for the year.
If you are looking to buy, I would kick your search into high gear and move ASAP.
During the fastest interest rate increase in history, we saw home prices appreciate 6.6%.
What do you think will happen to the market as interest rates drop?
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