On the previous Cyr Team Blog article, we discussed “What to Expect with Home Affordability in 2024.” [Click here to read the full article.] We shared data and trends from our recent report comparing real estate sales trends between 2023 and previous years. [Click here to download report.]
There are some additional topics from the report that were not covered in the previous article. We want to take this opportunity to talk about a few more issues worth highlighting. Our goal is to give 2024 home buyers and sellers a full picture of the real estate market. This way, you can be better educated and prepared for your next move.
Generation Gap
First, let’s talk about the how generational homeownership trends are shaping the current real estate market. Right now, baby boomers have much of the control. They are a large segment of the population and hold a greater percentage of wealth compared to younger generations. They are able to pay more cash when buying homes and have greater overall financing strength. Many boomers are deciding to stay put and “retire in place” rather than move out for their retirement years. Or, they are using their wealth and simply opting to buy second homes without selling their current property. Some might buy and hold additional properties for investment purposes. In turn, this can help them build even more wealth.
In many cases, we see boomers competing against millennials for available properties and winning because of their financial advantages. This is making it more challenging for younger generations to achieve the goal of homeownership and the long-term wealth gains that generally come with it. In addition, more young buyers are turning to their family for help when it comes to buying houses (“Nepo-homebuyers”). This is one way they have been able to compete for properties. In fact, 40% of buyers under the age of 30 received family money for purchase, according to Forbes in August of 2023. Research indicates this trend is increasing across all price points.
Migration Patterns
Another issue to consider is the fact that fewer Americans are relocating in recent years. The overall numbers have been going down for the past few decades, with a record low of 8.4% in 2021. We had a nice spike in real estate sales in 2021, but there was not of locational movement. Those who are moving to new areas are following consistent migration patterns. The trends show steady movement away from high-cost states with high home prices and tax rates. This has increased inbound migration in more affordable (often very tax-friendly) states like Texas, Florida, Arizona and the Carolinas.
If your state is one with an outflow of population, it’s important to understand future prices may not increase as much as buyer demand weakens. Prices may go up in markets with larger inflows of population. Buyer demand goes up, and so do property values. This may lead existing homeowners to sell and try to find an even more affordable location as the markets keep shifting. If housing is expensive of unavailable, people will choose to live elsewhere.
Why Don’t Homeowners Want to Sell?
Many of today’s homeowners feel trapped by their situation. They are settled in with a good mortgage rate and manageable mortgage payment. They know moving will cost them more money because a new house will have a higher price and a higher mortgage rate. Even homeowners with significant home equity cannot really utilize it. Borrowing against the equity seems expensive and that cash will only go so far if they decide to sell and buy another property.
Here in Pennsylvania, homeowners are staying in their homes longer than any other state in the country. On average, people stay in their properties for 17 years here—compared to a nationwide average of 13 years.
The lack of sellers leads to a less fluid housing market, which causes supply and demand imbalances. This imbalance will shape market conditions in any given area. If there are fewer houses to sell, the sellers will benefit with higher prices and more buyer competition. If buyer demand is low and more houses are available, then buyers benefit. You will want to know where your market is regarding this imbalanced. Like all real estate, it can be very localized. Knowing the conditions can help you make better buying or selling decisions.
2024 Real Estate Outlook
As we get into 2024, we expect mortgage rates to come down and eventually stabilize. Buyer demand will naturally increase as home affordability improves. Home prices will stay firm as long as buyers are interested and housing supply remains low. In our area, there is limited new construction and a decrease in mortgage rates should help spur more buyer activity this year. Some experts believe it may reach as low as 5.0% again in 2023. Experience shows that rates of 5.5% or lower help “unlock” sales. We may be looking at a transactional increase of 15-20% compared to the lowest point of 2023.
Sellers who have been waiting may decide to take advantage of these good selling conditions. However, buyers will be more disciplined. Days on the market will go up, so sellers need to do more to prepare their homes. Home inspections and appraisals will play very important roles in the selling process. Sellers may also expect more price reductions and complicated transactions, with buyers less willing to waive important contingencies.
Last but not least, uncertainty will likely increase as we get closer to the 2024 election. We expect a slowdown of real estate activity between September and December as people wait to see how the economy, real estate market, mortgage rates and other factors will be affected by the election results.
If you are considering buying or selling a home in 2024, it’s never too early to start preparing. Contact The Cyr Team today for a personal real estate consultation and get ready to make your move!