You don’t have to be Warren Buffett to know 2023 was a tough year for real estate. But you had to be as smart as Warren Buffett to make money in it.
Agents and brokers were scrambling to close deals. While the door slammed shut for the average America home buyer, it was wide open if you were a seller. Or an investor with deep pockets.
Only 15% of homes were affordable in 2023 for the average American buyer, according to Redfin, the Seattle-based real estate company. Buyers had to earn $115,000 to afford an average home – about $40,000 more than a typical household income.
Sky-high mortgage rates and still-rising home prices made it harder than ever to buy a home, especially for first-time buyers. The typical buyer needed to earn 15% more than they did a year ago, and wages were only up 5%.
A 30-year mortgage rate reached 7.13% on December 2023, down .02 basis points from October, but still unaffordable for most buyers and turning the dream of owning a home into a nightmare.
So, what’s in store for 2024?
According to real estate expert Lois Collins, housing prices and mortgage rates are expected to decrease in 2024. But don’t get too excited. The changes are expected to be slight, and the housing market will still be flat and challenging for many.
Mortgage rates will fall but not enough to make a huge difference. Zillow says the rates will inch down slightly but stay above 6%, well above the rates just a few years ago and higher than the rates currently held by 90% of those who already have a mortgage. In fact, two-thirds of mortgage holders have rates below 4%, so they’re unlikely to make a move.
Home sales may see a bump but it won’t be a boom. Most mortgage holders have lower interest rates now so they’re not planning to sell their homes and buy a new one because they can’t match the rate they already have.
Home prices will stay flat or drop slightly in most states. Realtor.com reports that since May 2022, buying a typical home with a 30-year, fixed-rate mortgage and a 20% down payment “meant forking over a quarter or more of the typical household paycheck.”
Zillow says that some sellers will conclude that the market’s not going to turn around quickly and interest rates will remain high, so they may decide to sell anyway, while housing prices are overpriced.
One noticeable exception is veteran entrepreneur and investor Grant Cardone. He is expecting the “greatest real estate correction” of his lifetime. The investor sees offices and apartments slumping in value, presenting bargains for savvy buyers.
“It will not be single-family homes, but it will include offices and apartment complexes,” Cardone says. “It’s going to be a great opportunity for individuals – regular, everyday people – to actually grab trophy real estate from institutions. This has never happened in this country. It’s going to be at epic levels.”
Rick Sharga, CEO of CJ Patrick Company, a market advisory firm, told Forbes – “I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,”
So, with that said, should you buy, sell, or hold off on making this important decision in 2024? We think you should hold off at least until spring and see what the market is going to look like then.
In other words – no boom, no bust – just more market uncertainty like in 2023. It may not be the answer you were looking for – but it’s a safe and sound one.