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Looking ahead to 2024, it's challenging to envision a scenario of significant price declines or substantial price increases in the real estate market based on existing data. Overall, prices seem poised to hold up better entering 2024 compared to the start of 2023, at least at a national and local level, such as on the Monterey Peninsula. However, the story may differ for those eyeing condominiums in downtown San Francisco or houses in Austin.
Why the lack of a forecasted boom or bust in the housing market for 2024? Forecasts do not predict significant drops in mortgage interest rates soon, and there's no anticipated surge of properties entering the market. This suggests a sort of holding pattern, which may not necessarily be a bad thing.
Last week, I covered the recent drop in mortgage interest rates; research from John Burns Research and Consulting indicates that most homebuyers aren't inclined to purchase at rates surpassing 5.5%, given that 90% of current borrowers pay less than that. Additionally, consumers are psychologically tethered to low rates, having become accustomed to them from 2008 to 2021. Nearly 90% of consumers expect rates to dip below 5.5% within the next five years, so until reality aligns with expectations for those buyers, they may try to hold off on making a move.
Turning to sellers, borrowers with current mortgages above 5% are nearly twice as likely to have plans to sell their home in the next three years than those with lower rates. Borrowers with higher rates face little to no disincentive to trading their current mortgage for a new one. We may see more inventory come from homeowners who purchased their homes recently, but those who have owned their homes for more than 18 or so months are not yet incentivized by the current rates.
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Jonathan Balog
DRE# 01980970
Broker
M: 831.747.0310
[email protected]
Compass is a real estate broker licensed by the State of California operating under multiple entities. License Numbers 01991628, 1527235, 1527365, 1356742, 1443761, 1997075, 1935359, 1961027, 1842987, 1869607, 1866771, 1527205, 1079009, 1272467. All material is intended for informational purposes only and is compiled from sources deemed reliable but is subject to errors, omissions, changes in price, condition, sale, or withdrawal without notice. No statement is made as to the accuracy of any description or measurements (including square footage). This is not intended to solicit property already listed. No financial or legal advice provided. Equal Housing Opportunity. Photos may be virtually staged or digitally enhanced and may not reflect actual property conditions.