Marty and Max: 2024 Real Estate Market - Boom or Bust?
| January 12, 2024 1:00 AM
Nationally we have higher inventory than last year with 546k single homes of the market. New listings are slightly higher than last year at this time and we have slightly more immediate sales. Remember buyers react more to a large change in rates than the actual rate itself. If rates stay the same, there is a huge buyer demand that we believe will result in a significant increase in the number of transactions.
Nothing in the metrics shows a flood of sellers that could come from investors dumping investments, job layoffs, Airbnb, etc. Falling rates mean falling inventory. In 2018 interest rates rose 100bps and inventory substantially increased. In 2021 rates fell and inventory fell.
There are so many buyers waiting for lower rates before they go shopping for a new home. If you are one of these you need to know, however, you are not alone. If rates have a huge decline there are so many others who have been clinging to this strategy for a very long time and the result very well may be much more competition, less selection, and perhaps higher prices.
If you find a home you like within your budget you may be better off buying now.
In December, 46k new sales were pending and 279k total pending. We have 3,000 more new pendings vs last year. Each week since the end of October sales have increased signaling, we have recovered from the bottom of the market. We believe this indicates growth in 2024. If rates get below 6% expect a huge year. It is worth saying again…Buyers react to significant rate changes more than they do the actual rate itself. If rates merely stay around 7% we can still expect growth.
Need more good news? The price of new pendings is up 3-5% nationally and the Days-on-Market average is 59 days. It peaked in Feb 2023 and has been declining since.
The Median Price of single-family homes nationally is $425k up 2-3% over last year. The median price of new listings increased to $377k. Prices were lower for most of the year and have recently risen above last year. This also indicates more sales in 2024.
Price Reductions are a leading indicator of where sales will happen in the future. The normal range is 30-35%. Seasonally there are more price cuts in the fall and winter. We are at the point where price reductions should be at the high point. We peaked at 43% in November and are currently at 38%. What we see is that there is a huge demand for buyers who are sitting on the sidelines waiting for prices to drop. How long are they going to wait? They have been waiting for a long time. So many folks feel that the bottom is going to drop. When you review the local data for last year the numbers can be interpreted that way. Earlier in the year our forecast was as follows:
"Sales prices in the future should not fall due to asking prices stabilizing, much more so than last year. The prices of newly listed homes are 1.3% higher than last year. This is a leading indicator of where sales prices will be in the future. At the end of this year, we expect home prices to be up from last year, unless of course rates soar. If rates go lower, you can expect more buyers, less inventory, fewer price cuts, higher prices, and a Happy New Year to All!"
So how is the market? Is the market up or down? Most will tell you that last year our local market was down. Although this is technically correct it does nothing to predict the future. In the attached graph look at all the metrics before July and then after July. We believe that the market bottomed out in July and has been improving just as we predicted. If you are a seller this is good news. If you are a buyer, you may want to spend more time in the market rather than trying to time the market. Locally the indication is that our market has bottomed out and has been steadily recovering since July. I think we crushed it. We have lower rates. We have less inventory. We have fewer price cuts. The last thing on the list is more buyers. We expect buyers to gradually increase between now and July and although we are not predicting a boomtown, we do expect a very good year in real estate for North Idaho.