What To Expect in 2024
As 2023 gives us it’s swan song, it’s time to look ahead to next years real estate market. A few factors could be at play over the next year, and it’s almost certain to be a different market than we’re in to finish 2023.
Briefly looking back, New Years 2023 was welcomed in with rather unwelcome mortgage interest rate of 6.5%. After briefly dropping to around 6% in February, they would continue to rise through October, peaking around 8%.This caused a lot of pressure on home buyers, and put a damper on the typical fall/back to school bounce that AZ real estate typically benefits from.
This allowed inventory to reach its highest point of the year towards the end of November right at the time of year many home buyers and sellers throw in the towel until the kick-off of the 2024 season.
Prices started the 2023 year with an AVERAGE sale price is $526k, and are looking to average $580k to finish the year, about a 10% increase. Looking at MEDIAN home price, we see a change from $415k to $438k, a more modest 6% for the 2023 calendar year.
So What’s Next?
The largest catalyst for where the real estate market goes from here is….you guessed it, our good friend interest rates. As the Fed has now publicly said it expects several interest rate drops throughout 2024, this will be reflected in lower mortgage rates, with experts predicting next year’s mortgage rate average to be in the low to mid 6% range.
If history is any indication, buyers don’t necessarily squeal with joy with 6ish percent interest rates, but they also don’t hate them like they do with an 8% rate. This ‘middle of the road’ rate prediction makes analyst expect home prices to appreciate at 1% nationally in 2024. However, AZ has shown time and time again, we are overachievers – star students of the country, continuing to allure with warm weather and prosperity. We don’t sit inline with the national average. I’ll put my neck on the chopping block and say with confidence, the Phoenix market will blow the national prediction out of the water in 2024.
At the beginning of this year, the prediction was for median prices to go DOWN 5% nationally, but the valley went UP 6%. Take the national predictions with a grain of salt.
With interest rates on the decline, and the new year/spring market lurking just ahead of us, I am anticipating a fairly sharp rise in buying activity in the coming months, which will lead to more competition, fewer homes for sale and ultimately higher prices.
Along with this more obvious effect, there may be some other changes, like seeing seller concessions go to the wayside as sellers start to re-gain more of an advantage in the market. 2023 saw record high seller concessions, and that trend is unlikely to continue in a lower interest rate environment.
New home builders who have had tremendous success with offering discounted below market interest rates are likely to continue those programs for now. I would guess if rates get back in the 5’s, these programs will evaporate fairly quickly, and builders will start back up with regular price hikes after keeping prices relatively flat over the last 18 months. These are truly excellent opportunities, take advantage while you can.
Put it all together and right now might just be about the best time for home buyers to buy a home in the Phoenix metro in the foreseeable future. Inventory is close to the annual high so the amount of choices are near the most they’ve been in a very long time. Sellers who have been sitting during the nothing-burger of a fall season may be ready to negotiate. Buyer competition is low as most would-be buyers are pre-occupied with holiday shopping and testing out that new eggnog recipe they saved on Pinterest.
However, I’m always an advocate of buying and selling when it makes sense for you, your family, and your personal unique needs. If you and your family need to make housing changes in 2024, please never hesitate to reach out. Wishing you all Merry Christmas, Happy Holidays and a healthy, prosperous New Year!