Let’s Talk Turkey
As Thanksgiving approaches and we reflect on the past year, there are always plenty of things to be grateful for (if you look closely enough), even in the real estate market. There have been some great opportunities for the savvy and patient buyers and sellers. I’m especially grateful for the trust and steadfastness of my clients—sometimes, waiting prevents disasters from happening. Knowing when to make an offer or where to price a listing takes market knowledge and strategic vision. I am thankful to work with so many who understand these dynamics—they are the ones who will ultimately reap the benefits.
A Soap Opera of Twists & Turns
As for the market itself…well, do you remember the soap opera As The World Turns? Simply replace “World” with “Market,” and that describes the up-and-down meanderings of the year. It’s been a wild ride, and the soap opera has all of us watching and waiting with bated breath. One thing is for sure: those who claim to know exactly what’s happening are probably the last people you should listen to. This month, I want to run through some of the latest data and projections to see if we can make sense of it all. I can’t predict the future, but I can arm you with a ton of market knowledge so you can make informed decisions.
Mike Simonsen of Altos Research provides a cautiously optimistic outlook for 2024, highlighting the interplay between sales volume, home prices, and mortgage rates. On the plus side, new listings and weekly sales volume have surpassed last year’s numbers. But while the market is normalizing somewhat, this recovery hinges on the stability of mortgage rates.
Rates and CPI
Okay, as of 11/18/23…and take this with a grain of salt…the recent Consumer Price Index (CPI) report, a crucial indicator of inflation, subtly influenced the bond market, which in turn affects mortgage rates. This slight deviation in CPI could—possibly…maybe…perhaps—signal a potential decrease in mortgage rates. Suffice it to say this would be an ideal occasion for those looking to secure a mortgage.
Some Food for Thought
“I’d say whatever our forecast is, it has a wider range of error than it normally would have. Right, we’re just at a point in the housing market to where I don’t think anyone really knows to tell you the truth. But, we can’t ignore that inventory remains down over 40% since pre-pandemic.”
~Sean Dobson, CEO, Amherst
Contrary to typical seasonal trends, home prices have shown surprising resilience, with some regions like Los Angeles and San Diego experiencing strong rebounds. This strength in home prices (based on reports from Case-Shiller, FHFA, and CoreLogic), coupled with a return to normal appreciation levels, suggests a strengthening market adjusting to new economic realities.
Percent Change in Home Values
Case-Shiller Home Price Movement
August 2023, Month-Over-Month Percent Appreciation in Top 20 Cities
US National: 0.9%
Affordability continues to be the biggest concern for buyers as high mortgage rates have become the new normal—drastic lessening with rates seems unlikely, at least in the foreseeable future. Homeownership has become a challenge as mortgage payments are escalating—especially as we hover in the 7-8% range. Oddly enough, the desire for homeownership remains strong—after all, people can only put their lives on hold for so long. This mentality keeps the market resilient.
Turkey Talk Takeaway
- Buyers may find opportunities in the current market conditions, with potential price reductions and more options available. However, stay vigilant about mortgage rate fluctuations and inventory trends.
- Sellers need to adapt their strategies, considering the heightened competition and the importance of competitive pricing. A potential market shift in the New Year could offer strategic listing opportunities.
- Investors should focus on long-term market trends and local market dynamics, watching for areas with decreasing demand or supply imbalances.