2024 Real Estate Market Predictions
2024 Real Estate Market Predictions
So what will 2024 look like for the real estate market? 2023 was a rough year with the interest rates surging and prices still increasing. It put a squeeze on home affordability.
So what’s in store for us in the Real Estate Market in 2024? Will we get a break in home prices? Will we see affordability improve? Or will it be more of the same where home prices continue to go up and the challenges in the marketplace for buyers get worse?
We are going to talk about it all from Inventory levels, buyer demand, the number of transactions, mortgage rates, recession likelihood as well as prices. Keep in mind that real estate is local and that much of what we will discuss is national, but I will also talk about the local Massachusetts market as well.
Real quick. My name is Jeff Chubb and I am a retired investment banker turned real estate agent that has sold more than a 1,000 homes. If you have real estate questions, then I am here to help.
Let’s first talk about interest rates, because they owned the headlines in 2023. The interest rate environment has improved significantly from the 8% peak that we saw in 2023 as we now hover around 6.5%. And this happened quickly which offered buyers pretty much instant relief.
In 2024 I believe that you will see interest rates stay within the 6% to 6.5% range. You may see some dips into the high 5’s, but interest rates are not going back to the 3 or 4% range. Do not hold your breath waiting for rates to go down that low to buy a house, because otherwise you are going to turn out looking like these guys!
The FED will do some rate relief. It’s an election year. It will happen. But I don’t necessarily think it’s as a given as the financial markets are pricing in for it to start in March. The job market remains stubbornly strong… Which is a great thing for all those who need a job, but an awful thing for the people who are tasked to get inflation down to the 2% range. Which by the way, I don’t see us getting in the 2% range happening. I think inflation will actually start coming back and the FED will have talked themselves into a decrease lower interest rates election year corner and will subside to higher inflation rather than hamper the economy.
Since we are talking about the economy already… Let’s finish this one off. The consumer is tapped out. They have loaded on more debt than anyone thought they could handle. But they just show no signs of stopping. I don’t know how… But I think this continues. I have bet against the consumer before and I just continue to lose. I am not going to do it now.
At this point I don’t see the newly defined recession happen. I say newly defined because it used to be economic growth minus inflation with two consecutive quarters of negative economic growth. An election year of Recession headlines won’t bode well for the current administration. The FED will do everything they can to make sure that doesn’t happen which includes as I mentioned earlier… Rate cuts even with higher levels of what they deemed as acceptable inflation.
But for us consumers, it will continue to feel like a Recession as inflation continues to hammer away at our buying power and our wages continue to not keep pace.
Let’s talk inventory levels. Inventory is low. Near record lows. Here in Massachusetts inventory is starting the year at the second lowest levels in history. And stories like this are all throughout towns in the U.S. We did not see the inventory growth that many expected in 2023. I knew that we weren’t going to see any huge inventory growth like many were calling for… But like many others did not see rates clamping down on seller supply like they did.
Everyone knew that rates going up would temper buyer demand… But I didn’t see anyone talking about how it was going to affect seller supply and how it was going to restrict so many sellers from coming on the market. People are handcuffed to their house with their beautiful 3% interest rates.
And this doesn’t change for 2024. Foreclosures are still below pre-pandemic levels. So no instant relief there because there is about a gap of a year timeline from a house going into foreclosure until it is able to be on the market. In other words, even if we saw a huge spike in foreclosure then that doesn’t equate to a ton of supply on the market. And by the way… IF that was to happen, then a huge chunk of those houses would never hit the consumer market. There are hedge funds and Private Equity firms ready to buy up Foreclosures from banks by the thousands.
I just don’t see any lever that can be pulled where you get substantial supply side relief. Because it’s not going to happen from the builder's side either. These low inventory levels are here to stay for from what I can tell… For the conceivable future.
Another big story in 2023 was the depressed sales levels in the real estate market. There is no doubt that they were down, but they were down to 2011 to 2012 sales levels throughout pretty much the entire country. It’s like we went from a Ferrari of a year in 2021 to a Mercedes of a year in 2022 and 2023 was a Chevy of a year.
Since 2005, we have seen close to 45 thousand single family units sell per year in Massachusetts. So there is no doubt that the little over 36 thousand units sold was well below average. But I do think this changes for 2024. We will not be going back to the Ferrari or even Mercedes like years of 2021 or 2022, but I do think we will build on the units sold in 2023.
And it’s interest rates that will have a lot to do with year over year sales gains. The high 5 percent interest rates will entice enough move up buyers to move the needle. But this market will continue to be driven by first time home buyers and the seller’s who are relocating whether it be because of job, retirement or well the final move…
I am thinking in Massachusetts we will see sales levels that are closer to 40 thousand units per year. So a little below the so-called average levels.
And how about buyer demand, what will that look like in 2024? It improves. And I can see it improving too much. We have about a year and a half of pent up buyer demand. The lower interest rates will entice many of these folks to move off the sidelines.
2024 will not be an enjoyable year for buyers in the marketplace. They will be confronted with continued high pricing, higher interest rates then the record low rates, but lower than the recent record highs and will also have to deal with a market where buyer demand outstrips seller supply. Back will be the days of multiple offer situations… Not just 2 or 3 offer situations, but 7 to 10 multiple offer situations. Back will be the days of no home inspections and appraisal gap coverage offers. Buyers who are putting minimal amounts down will end up having the biggest headaches. As will buyers who properties to sell.
And speaking of buyers that are sellers, this will lead to the disappearance of the offer that is contingent upon the sale of a house. We were starting to see these come back strong in 2023. They will come close to disappearing again in 2024. Sellers will have to sell their home first in order to be competitive with buying. They will have to sell with a buyer that is willing to offer them a suitable housing clause or a buyer that is willing to close on the house and offer a rent back. People who are looking to buy with houses to sell are going to have to look at a home seller strategy all over again.
And that leads us to the last prediction of 2024 which is prices. Nationally they will be up this year. And our local market in Massachusetts will outperform the national average. Home prices in Massachusetts appreciated 4.8% in 2023. I believe that Massachusetts homeowners of Single Family homes will see an appreciation rate between 6 to 8%.
It’s going to be that type of year. But a great place to live is Weymouth Homes For Sale .
Wildcards. What are my wildcards for these 2024 Real Estate Market predictions? The first is the economy. If things get real bad, really fast then this could damper home sales and the appreciation rates. How could this happen? Maybe a terrorist event or World War 3? The FED is going to do everything it can to keep their soft landing fairy tale a reality.
Another wildcard is if rates don’t end up moving down as expected and the FED doesn’t end up cutting. That could have an effect on the market, but if that was to happen then you would see a year that is similar to last year and therefore I still see the market ending on the plus side when it comes to appreciation.
I don’t see any scenario where housing prices fall in 2024. Demand is outstripping supply and we aren’t building enough houses to keep up with the natural and over the border population growth.
There you have it. Those are my 2024 Housing Market predictions. Have at it. Let’s hear your predictions in the comment section below.
Let me know if you have any questions. You can drop me a line in the comment section below or I invite you to reach out to me as all my contact information is in the description below.
As always, I truly appreciate you keeping me in mind should you or anyone you know are thinking about buying or selling a home in 2024!
So until next time.