Everyone Got It Wrong in 2023. Here's What You Need to Know About 2024.
Experts are forecasting a 2024 real estate market with more inventory, lower rates, and rising prices. Yet, considering 2023's 8% interest rates and record-low inventory, these predictions don't seem particularly daring. The real question, the one everyone's eyeing, is what housing prices will do in 2024. Before we tackle that, let's look back at last year's predictions.
The Problem with Most Real Estate Predictions:
Most real estate forecasts are biased, often painting an overly optimistic picture. These predictions are often fueled by conflicts of interest, aimed at benefiting the industry rather than providing accurate information. Push come to shove, ZIllow had to admit they would drop out of the home buying business because they could not accurately predict values.
A Look Back at 2023 Predictions:
- Realtor.com: Predicted average rates of 6.4% and falling prices. Reality: Rates exceeded 7% and prices rose.
- Zillow.com: Predicted flat prices and decreasing interest rates. Reality: Prices and rates both increased.
- Redfin: Predicted price decreases, rates under 6%, and a construction halt. Reality: Rates exceeded 8%, new construction boomed, and prices rose.
- National Association of Realtors®: Predicted price increases, rates under 6%, and a construction pullback. Reality: See the above predictions.
What Actually Happened in 2023:
- Interest Rates: Rates climbed higher than anticipated, spending much of the year above 7% and peaking over 8%
- Home Prices: Contrary to many predictions, home prices were resilient, showing an average increase of over 5% nationwide. Some metro areas fared better than others.
- Existing Home Sales: The number of existing home sales fell to its lowest level since 2001, defying many forecasts. Although new home sales had a blockbuster year, it wasn’t enough to satisfy demand.
Surefire 2024 Prediction:
In 2024, Realtors will get worse. Downward pressure on commissions and lower transactions are causing a flood of terrible guidance. More on this in a future blog post.
Expect a continuation of one-size-fits-all advice from many real estate agents and industry peers, often serving their own interests. Beware of clichéd and potentially misleading tactics like “Buy fast before rates drop and prices soar!” or “Sell quickly before rising inventory lowers prices!” These simplistic views overlook individual market dynamics and can lead to ill-informed decisions.
Critical Questions to Ask:
- What if economic downturns or stock market woes drive rate cuts? Will housing prices still rise in a struggling economy?
- If home prices increase, wouldn’t that fuel inflation, counteracting 2023's efforts?
- Do political events, like elections and war, significantly influence the market?
- What if the expected inventory from boomer sales doesn’t materialize?
- What constitutes 'lower rates' in the current economy? Can a rate around 6.5% really boost demand?
My Perspective:
Here’s my take, with a caveat: My 2024 listing pipeline is far more robust than last year. The listings are coming from boomers finally ready to sell, investors taking their profits, and folks who have bought or are moving out of the area.
I’m skeptical about significant rate drops, especially since higher rates haven’t drastically deterred demand. A strong economy with rates in the 5% range seems unlikely; higher rates appear to be working, and I think we will adjust to the new normal range.
This past year has underscored the value of patience. Those who weathered the rate volatility and global events saw persistent buyer interest and resilient prices. Looking ahead, I’m optimistic about a more balanced 2024 market. Well-priced, desirable homes should appreciate in value, and intelligent buyers will benefit from an influx of genuine sellers with substantial equity.
What Do You Think Will Happen in 2024?
