John Karadsheh
Happy New Year! We are looking ahead to 2024 and anticipating a stronger real estate market on the horizon. Here are our thoughts on what to expect in the coming year.
MORTGAGE RATES
At the start of 2023, mortgage rates were averaging 6.5% and we had hoped the year would bring stability. Instead, the Fed continued their rate hikes, and, by the end of October, mortgage rates had climbed to just shy of 8%— negatively impacting consumer confidence and housing affordability. In December, when the Fed announced that they would hold rates steady and suggested there would be several rate cuts in 2024, the market breathed a collective sigh of relief. The good news drove rates below 7% for the first time since August and stimulated unseasonably strong market activity. In 2024, we expect rates to slowly decline into the low 6% range and, if the Fed continues to loosen monetary policy, we may even see rates drop into the high 5% range. We can only hope lower rates will be as good for the real estate market as Taylor Swift has been for football.
INVENTORY
The sluggish market of the summer and fall made it feel like we had way too much inventory. However, a lot of the homes that had lingered through the sluggish market have now sold. Quality homes that were new to market in the 4th quarter moved quickly and we had multiple offers on several of our listings. Unless sellers are willing to trade their existing low interest rates for higher ones, inventory will continue to remain low. Low inventory will remain the back stop for property values, while increased buyer demand will likely lead to rising prices in 2024. We expect a bump of 3 to 5% in property values in 2024.
BUYER’S MARKET VS. SELLER’S MARKET
We are kicking off 2024 with a balanced market but we don’t think that will last for long. There are a lot of buyers waiting for rates to drop, so we anticipate that in the spring we will see more of a seller’s market due to continued low inventory. With traditional buyers coming off the sidelines, winter visitors coming to the Valley, and Phoenix ranked as the No. 1 relocation destination in the country, we expect a very lively spring and summer buying season. However, as we approach the presidential election in the fall, we foresee that market activity will wane (as it usually does during national elections), and buyers will have more opportunities.
Preparation will be the key for buyers and sellers in 2024. As the market heats up, buyers will need to have a well-organized financial plan for buying a home and be ready to be decisive when they find a quality property. The spring market will move quickly and buyers with a solid plan and strong, experienced Realtor representation will have greater success in the competitive environment.
Sellers will also need to be organized to attract the best buyers. They will need to have their homes properly prepared for the market and be fully organized for their next move. Even though we expect the market to heat up, buyers will remain hesitant to buy deferred maintenance and cosmetic neglect. Many buyers are still willing to pay a premium for newer construction and that will continue to be the challenge for aging resales.
While 2023 was a little bumpy for the real estate market with high interest rates and a low volume of sales, 2024 will bring some of the sparkle back to the market. Many potential buyers and sellers have been waiting in the wings and the coming Year of the Dragon may very well get them roaring to move once again.
John is the Designated Broker of KOR Properties and has been a Multi-Million Dollar producing agent for over 21 years. He is an Accredited Buyers Representative (ABR) and Certified Residential Specialist (CRS), and serves on the Arizona Regional MLS (ARMLS) Rules & Policies Committee, ARMLS Appeals Committee, and the West and Southeast Realtors of the Valley Professional Standards Committee.
Natascha is a Multi-Million Dollar Producer and Accredited Buyers Representative (ABR). She is the Founder of Mesa Food Truck Fridays, a Member and Past-Chair of the City of Mesa Economic Development Advisory Board, and on the Board of Directors of the Greater Phoenix Economic Council.