How much have you read about the real estate market? Where it’s at, where it is going and why? So much has changed in the last twenty years and for those who have experienced it, the least you can say is that you received a first-class education on economics and real estate, especially between the ups and downs, interest rates and more. So, what is the current state of the market, where is it going and why?
Before diving into that, it’s important to look into why the market is where it is at right now. For the past five years prices on homes have shot up considerably. In many areas around the country, homes have doubled in prices in that time with minimal improvements made to both the property and the surrounding area. That growth, while great for some, has created a challenge for several homeowners as well as potential buyers. One of the biggest challenges buyers face now is dealing with low inventory and high interest rates, making it more difficult to get approved and to get a deal done.
What’s Going On In The Market Now
Currently, the market is not as hot as it used to be, but homeowners are still getting solid interest and value. The cost of the home, while significantly higher, has come down a little over the last three months, mostly due to rising interest rates and other costs. This is the goal of the Fed and their hope is that higher rates will cool off what was a very hot market. While the inflated rates have had an impact on buyers, they have not slowed down the market enough to make a significant impact in property values. Because of low inventory, demand remains high for single-family homes which are not necessarily being built throughout the country anymore.
Because most property developers want to go with condos, townhomes, apartments or commercial properties, getting a single-family home means that you have to put serious money down on a property and be willing to take it as is, meaning with any problems that are there. Those problems will be your responsibility to address as the new homeowner and you need to be prepared for that, especially if the repairs and upgrades needed can cost tens of thousands of dollars. If a buyer is fine with those conditions, they can still get relatively fair value for a property and work out a deal with ownership.
Why Are Interest Rates Up
You have heard a lot about interest rates going up and they will not continue to go up and stay higher than wanted for at least the next year, maybe two. The reason the rates are up is to simply battle inflation and keep borrowing down, especially at a time when debt was increasing too rapidly among consumers in the country. The economy has been through a lot in the last five years and it needs help to stabilize and to avoid a crash like before. The good news is that home values have remained high during the right hikes and even better, they are not expected to go down more than 10-20% at the most.
Even with a decline like that, values are not expected to drop any lower because of the demand of the properties. With lower costs on the houses, buyers may ignore interest rate hikes and go for the property they want, especially if inventory remains a primary issue. Rates are also up to impact other areas of finance. However, it was inflation and the rapid borrowing for the housing market that forced the rates up and why they will continue to stay up for some time.
Expectations For The Market In The Fall Of 2023
This fall, many are expecting home values to continue to stay high, but perhaps drop off a little. This is due more to the higher interest rates than it is the market itself slowing down. In fact, most homeowners who decide to sell are still getting interest and fair offers for their property. The primary difference between now and two years ago is that the property owner may have to wait longer to get a fair offer. Investors and buyers looking for a great deal may provide a lower offer early on, but if you are patient, you will get fair value.
One of the other reasons home prices are not expected to fall immediately, or rapidly is because of the current state of mortgages in the country. Foreclosures are not yet happening and most people, especially if they got their mortgage over two years ago, are locked into an affordable rate and an affordable monthly payment. That means they can withstand dips in the market without owing more on the property than it’s worth.
Expectations For 2024
While 2023 has been an interesting year, experts are starting to weigh in on what to expect next year. Right now it looks like 2024 will be a slow year in the market as far as value goes with some areas expecting to see a dip in prices of up to 10% or more. However, while these prices may drop for the next year, they are not expected to stay down, again mostly because of low inventory and the demand for these single-family homes. Even if the property needs a lot of work, buyers and investors are still competing for any property that’s available and they will pay near or at asking price to get it.
Interest rates have cut the buyer pool in half, but that still leaves plenty of qualified buyers who are willing to ignore the inflated costs and grab a property now rather than later. While this strategy is debatable for the buyer, for the homeowner it’s a great opportunity to get the most recent value of your property without losing tens of thousands due to the current state of the market. You will still be able to buy or sell a home in 2024 with great success.
Working With An Experienced Realtor
While many are unhappy with the change in the real estate market, these changes have been slow to develop and are not having the impact people think they are. Yes, rates are up and that makes buying a property far more expensive for many. However, the slow cooling of the market is temporary and may actually be healthier for the market considering how aggressive home prices were rising in the past five years. Buyers and owners can take advantage of this cooling period and research different trends and changes in the upcoming market.