2024 Market Outlook

2024 will be an interesting year in the real estate market. In 2023 we saw a slowdown and I expect to see the same thing in 2024 with the possibility of an upside in the latter half of 2024. If the FED does lower rates, expect to see people rushing into the market. So if you are considering buying, do not wait for lower interest rates because the resulting increase in demand will cause a price increase. In one sentence expect data to show continued market expansion.

To create a balanced market interest rates need to come down, and inventory needs to increase at the same time. Otherwise, if inventory stays the same while interest rates decrease, home affordability will remain unchanged. This is because as interest rates decrease, demand will increase. If demand increases without a simultaneous increase in supply prices will also increase. Leaving home affordability unchanged…

I believe that in 2024 we will see a slight increase in supply and lower interest rates. I also think that we will see prices continue to increase but at an even lower rate than in 2023, at least until the supply curve completely evens out.

The most Healthy but also unattainable scenario would be for interest rates to hover around 5 - 6.5% and simply for more houses to magically appear to force a drop in prices…

No matter what happens, we can all agree that 2024 real estate investors will need to tread lightly and pay close attention to market conditions.

Deep Dive:

One factor that could contribute to increased supply in 2024 is the condition of the commercial real estate and office space market. In 2023 Commercial real estate took a beating, and thousands of commercial office buildings continue to be sold at a discount. According to the Council of Economic Advisers to the White House, corporate office occupancy has reached a 30-year low. Which introduces the concept of adaptive reuse. With the need for office space at an all-time low, corporations are adapting accordingly and beginning to convert these office spaces into residential condos & apartments. The White House also recently announced a new initiative to support the conversion of high-vacancy office buildings to residential use. An example of this can be found in our backyard with the Carew Tower downtown. Projects like these are happening all across America. As these units start to become available, rent prices will be the first metric affected, followed by multi-family median sale price.

Another factor to consider is that currently, 10,000 people per day turn 65. By 2030 the entire baby boomer generation will be over 65. That is 21% of the US population, there will be more people over 65 than under 18. AARP data suggests that 51% of people over 50 downsize their home, this would mean that about 30 million homes should be coming back into the market. This trend could start in late 24 and carry on for several years. …..(Meredith Whitney Theory)

Lastly, new data shows that nearly 1 in 10 of all FHA loans are delinquent on their mortgages. In May of 2023, the FHA put into effect a rule that allows FHA borrowers who are in default to modify their loan, taking the remaining loan balance and reconfiguring it into a 40-year mortgage. This is not a good sign, it will be interesting to see if the government continues to "bail out" over-leveraged borrowers in 2024. If you are an investor, this is a good indicator to pay close attention to opportunities to purchase foreclosed properties in 2024.

-Cameron Gunnels