The Real Estate Market Springs Forward!

Dated: April 2 2024

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Earlier this year, Jessica Lautz, deputy chief economist and vice president of research for the National Association of REALTORS®, provided updates on economic and industry trends.

Looking Back at 2023

Lautz ackowledged that 2023 was a challenging year for the industry.

In 2023, as the country’s population continued to grow, inventory was limited and home sales were the lowest they’d been since 1995. While there were about 1.6 million units in the marketplace in 1995, there were under 900,000 units in December 2023.

Lack of inventory translates to high demand and higher prices. In some areas of the country, pricing has seen a 45% increase year-over-year.

The low interest rates of the early pandemic brought additional buyers into the market who purchased new primary residences, vacation homes and future retirement homes, which contributed to price increases.

A Favorable Outlook for Spring

With interest rates improving, Lautz anticipates an upturn in market activity this spring.

The 30-year fixed-rate mortgage rates were nearly 8% in October, 2023, and averaged around 6.9% as of mid-March, 2024.

While the current average rates have improved, buyers should not expect to see rates of 3% or less again in our lifetime.

Issues with Affordability

According to NAR’s affordability index, the typical home buyer in today’s market is spending approximately 27% of their income on their monthly mortgage payment, compared to the historic norm of 20%.

First-time home buyers entering the market are both older and wealthier, but employees integral to their communities—teachers, social workers and firefighters, for example—are being priced out.

Generational Differences

Baby Boomers still hold the largest share of the housing market, and half of them are buying with cash. Many Boomers have reaped the benefits of equity and are considering retirement in more affordable areas.

One trend of the Gen-X generation is that they’re the most likely to purchase multigenerational properties.

The median age of today’s firsttime buyers is 35, which represents the near middle of the millennial generation. Historical norms for first-time buyers’ ages are 28-29 years old. Older firsttime buyers have different housing needs and have missed out on quite a few years of equity compared to a 28- year-old buyer.

Sticky Trends

A “sticky trend” suggests that a specific behavior within the market will likely “stick” despite fluctuations in the economy or otherwise.

One trend is migration. More than ever before, Boomers and the Silent Generation are willing to move far distances to be near friends and family.

The Sunbelt and mountain states are still the most popular, offering sun and temperate weather, views and possible favorable tax regulations.

Buying sight-unseen became more common during the pandemic. Some of this was due to isolation requirements and safety concerns. Some of it was due to the sheer distance people were moving. In 2023, 9% of buyers purchased their home completely sightunseen.

Some Good News

Homeownership is still an important way to build wealth and live the American dream. NAR data shows that the average net worth of homeowners is around $400,000 compared to renters at $10,000.

As you consider your first move or your next move, contact me to explore your options!

Source: Mary Breuer, Breuer Appraisal Services, LLC

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