{"id":25983,"date":"2023-12-13T06:00:00","date_gmt":"2023-12-13T11:00:00","guid":{"rendered":"https:\/\/www.zoocasa.com\/blog\/?p=25983"},"modified":"2024-01-03T12:27:33","modified_gmt":"2024-01-03T17:27:33","slug":"exp-2024-us-predictions","status":"publish","type":"post","link":"https:\/\/www.zoocasa.com\/blog\/exp-2024-us-predictions\/","title":{"rendered":"What Does the Future Hold? Four Predictions for the 2024 U.S. Real Estate Market"},"content":{"rendered":"\n

Cliquez ici pour la version fran\u00e7aise<\/em><\/strong>.<\/a><\/p>\n\n\n\n

Predicting what\u2019s to come in the United States real estate market is never a sure bet, but indicators from 2023, including economic fluctuations, buyer demographics, and the impact of recent global events help to bring things into focus. Several key observations collectively paint a picture of challenges and opportunities for real estate agents, homeowners and home buyers. Let\u2019s take a look.<\/p>\n\n\n\n

1. Agents Need to Focus on the Homeowner Who NEEDS to Sell<\/strong><\/h2>\n\n\n\n

It\u2019s no secret there is a dearth of homes for sale in the U.S. Inventory has struggled to keep up with demand \u2013 especially due to the pandemic when several factors were at play. First, buyers realized they could work virtually from anywhere in the country and took advantage of low interest rates, buying homes that better met their needs. Secondly, supply chain issues and the rising cost of materials hampered new construction. Third, investor activity surged, further dwindling inventory.<\/p>\n\n\n\n

Now, mortgage rates have rebounded hard the other way. According to The Mortgage Reports<\/a>, the average 30-year fixed rate was 3.22% in January 2022 and has skyrocketed to 7.76% in November 2023. That\u2019s almost a 5% swing which means that any homeowner who would like <\/em>to sell their home is unlikely to do so at this time because they are locked in with \u201cgolden handcuffs\u201d \u2013 or rate lock. Homeowners are reluctant to give up on their low mortgage rate below 4%, only to take on rates at or above 7%. <\/p>\n\n\n\n

\u201cThe purchase loan applications have fallen off dramatically,\u201d said Michael Valdes, Chief Growth Officer at eXp Realty. \u201cThey\u2019re off about 30%. Also, when you consider the refinance market, who is going to refi?  Refi\u2019s are down 80%. Here\u2019s another crazy stat: 70% of the folks who are homeowners have an interest rate below 4%. This \u2018rate lock\u2019 is what keeps inventory levels critically low.\u201d<\/p>\n\n\n\n

For real estate agents who are challenged to find homes to sell, they should focus on homeowners who need<\/em> to sell.  \u201cThere will always be motivated sellers who need to move due to job relocation, financial constraints, or changing family circumstances. Those are the people who have to sell. But, you might have a client with a 3% interest rate who you think won\u2019t sell. Don\u2019t assume anything. Sometimes, people have to<\/em> sell,\u201d said Leo Pareja, Chief Strategy Officer at eXp Realty.<\/p>\n\n\n\n

2. Investors Will Still Account for a Large Percentage of Purchases<\/strong><\/h2>\n\n\n\n

In a report<\/a> by the Joint Center of Housing Studies at Harvard University, citing information by CoreLogic, investors took advantage of low interest rates and plunged into single-family home investments during the pandemic, which helped drive up rent prices and put a squeeze on inventory. Investor activity rose quickly in 2021 before peaking at 28% of sales in the first quarter of 2022. <\/p>\n\n\n\n

As of June 2023, investors accounted for 26% of all single-family home purchases according to CoreLogic<\/a>. That is the national average, but in some markets, that figure could be as high as 35-40%. While the assumption is that hedge funds and institutional buyers are the majority of the buyers, many homes were purchased by small to midsize investors who\u2019ve been sitting on cash. <\/p>\n\n\n\n

In 2024, investors, who remain drawn by the potential for rental income and long-term capital gains, will remain a significant demographic of single-family home purchasers and will continue to push out first-time homebuyers.  In a startling statistic, analysts at MetLife Investment Management estimate<\/a> that by 2030, the large institutional buyers may hold some 7.6 million homes, or more than 40% of all single-family rentals on the market.<\/p>\n\n\n\n

3. Opportunity for Distressed Homeowners With Equity to Move Up and List<\/strong><\/h2>\n\n\n\n

While the Great Recession forced many homeowners into delinquency and eventually foreclosure, this market is a bit different. Yes, people are hurting to make ends meet, but the silver lining in the current real estate market is the opportunity for distressed homeowners who still have equity in their properties to list and thus, avoid foreclosure. <\/p>\n\n\n\n

According to the Mortgage Bankers Association<\/a>, mortgage loan delinquencies are low. They are at a seasonally adjusted rate of 3.62%, whereas the typical rate is 5%. It is estimated that borrowers have a large amount of equity in their homes to the tune of $30 trillion<\/a> and can ride out any imminent danger of foreclosure. <\/p>\n\n\n\n

Marina Walsh, the MBA\u2019s Vice President of Industry Analysis, said \u201c… distressed homeowners may be utilizing available loss mitigation options that prevent a foreclosure start. Additionally, accumulated home equity may also be enabling some homeowners to sell their homes well before foreclosure becomes a possibility.\u201d<\/p>\n\n\n\n

\u201cEach market cycle is different,\u201d said Pareja. \u201cYou\u2019ll hear the terms delinquency, foreclosure, REO and think of them interchangeably, but it\u2019s a sequence of events. Folks in delinquency are in trouble. They are struggling to make ends meet. But the substantial difference is that 88% of borrowers in foreclosure have more than 20% in equity and 68.4% of distressed sellers are selling ahead of the foreclosure sale.\u201d <\/p>\n\n\n\n

In contrast to 2009, which was characterized by an inundation of foreclosures and REO properties, the current market is the opposite. Homeowners, buoyed by substantial equity, are steering clear of foreclosure, opting instead to proactively list their homes for sale.<\/p>\n\n\n\n

4. Existing Home Sales on Pace To Be the Lowest Since 2009<\/strong><\/h2>\n\n\n\n

U.S. real estate continues to face several years of low inventory, first brought on by the huge demand and then constriction during the pandemic. But now higher mortgage rates are keeping potential home sellers on the sidelines.<\/p>\n\n\n\n

According to the National Association of Realtors (NAR), the U.S. is on track to have the lowest home sales on record since the Great Recession \u2013 4.675 million sales, which is almost a 40% drop since 2021\u2019s peak of 7 million home sales, including resales and new construction.<\/p>\n\n\n\n

According to NAR,<\/a> existing home sales fell 2.0% in September 2023 to a seasonally adjusted annual rate of 3.96 million units \u2013 the lowest level since October 2010. <\/p>\n\n\n\n

\u201cThat is about 300,000 shy of what everyone predicted at the start of the year,\u201d said Pareja.   \u201cThe only bright spot is that new construction will probably hit 675,000, which is higher than everybody was predicting.\u201d<\/p>\n\n\n\n

Safe Harbor Statement<\/strong><\/h3>\n\n\n\n

The statements contained herein may include statements of future expectations and other forward-looking statements that are based on eXp World Holdings, Inc.\u2019s (\u201cwe\u201d and the \u201cCompany\u201d) management\u2019s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. These statements include, but are not limited to, statements about industry trends, including buyer and seller demand; geographical and geopolitical trends; predictions related to fiscal policy;  and the continued growth of our agent and broker base. Such forward-looking statements speak only as of the date hereof, and the Company undertakes no obligation to revise or update them. Such statements are not guarantees of future performance.<\/p>\n\n\n

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Questions about the 2024 market?<\/div>\n
Contact us today to speak to a Realtor in your area<\/div>\n<\/div>\n