2024 Trends of Home Buying in a Changed Market

Rachel Cherem

Written By Ryan Merchant

Published 05/02/24
2024 Trends of Home Buying in a Changed Market

The longer days and warming weather of spring have traditionally signaled an uptick in real estate activity but the modern housing market is anything but predictable. The broader market is still feeling the reverberations of the pandemic's upheaval and the rise of remote work, not too mention the effects of other economic realities; from inflation and interest rate hikes to generational shifts as large cohorts of Baby Boomers, Gen X, Millennials, and Gen Z age into the next phase of their lives.

Recent news makes immediate real estate market trends still harder to map out. The Federal Reserve suggested that cuts to interest rates are in store for 2024, and legal challenges to major real estate brokerages and the National Association of Realtors have resulted in major changes in how real estate transactions operate. 

Still, seasoned experts can get a lay of the land and chart the likely trajectories for housing market trends through the summer. The Liberty Home Guard team has compiled projections from experts to help you make the most of current real estate trends, whether you're a realtor building your business, interested buyer, or current homeowner looking to offload a property.

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Real Estate Market Update: Where We Are in Spring 2024

The U.S. housing market is always subject to regional variability home prices, vacancy rates, and their associated trend lines may be very different in Clark County, Nevada, relative to Fairfield County, Connecticut but a general assessment of housing nationally reflects the following:

Low housing stock

High but reasonably stable home prices

Lagging new construction

Strong demand among both consumers and corporate investors

Uncertainty about mortgage rates

This confluence of factors has sustained a seller's market, and while some circumstances might change in the coming months, most experts agree that conditions favorable to sellers will persist in 2024.

The U.S. Real Estate Market and Housing Inventory

Simply put: America needs more homes. There is a demand among aspirational buyers to own homes of their own, but the housing inventory in much of the United States is frustratingly low. Housing stock was at record highs in 2007, shortly before the financial crisis of 2008 and subsequent Great Recession. Inventory trended down for years, hitting an all-time low in 2022. The number of available homes has climbed in the last two years, but not dramatically so. There just aren't enough homes to meet current demand.

There is no one single cause for the limited housing inventory in the current market, and the factors that have contributed to this reality are interrelated. 

Pandemic-era Demand The COVID-19 pandemic spurred unprecedented demand for housing, particularly in suburban areas, and many available homes were scooped up by first-time buyers and homeowners looking for additional properties. 

Sluggish New Home Construction At the height of the pandemic, new home construction was not able to adequately keep up with the surge in demand because of supply chain and logistics dilemmas the materials required to build a home were unavailable, delayed, or exceedingly expensive. Today, rates of new home construction are increasing, but not as quickly as some interested buyers, realtors, and builders would hope. We are still feeling the effects of the pandemic's disruption, and new construction has yet to catch up to the highs of the early 2000s.

Inflation New construction has also been stymied by inflation. Housing materials and labor, like most other consumer goods, have increased substantially in cost. 

Institutional and Corporate Investors A somewhat recent phenomenon has been the increase in real estate purchases by institutional investors, brokerages, private equity firms, and other economic movers and shakers. The National Association of Realtors found that in 2021, corporate investors accounted for more than 10% of residential home purchases. The average aspirational homebuyer can't compete with the financial resources that corporate investors have at their disposal and are often shouldered out of a potential home as a result. Additionally, a portion of the homes corporate buyers purchase are converted into rental units, effectively removing them from the national housing stock.

High Mortgage Rates The Federal Reserve hiked interest rates eleven times between March 2022 and July 2023. The effects here are twofold on housing. First, the resulting higher mortgage rates put downward pressure on home buying, including new construction, slowing the accretion of new inventory. Second, many homeowners across America feel a strong incentive to stay in their current homes where they have mortgages with low rates. 

Economic Inefficiencies Bureaucratic inefficiency and zoning and permit complications also play a role in suppressing available housing. Often this is most pronounced at the local level. It's not uncommon for major cities to add new jobs at a rate far outstripping that of new housing permits. This means there is an influx of new residents competing for a comparatively limited housing pool.

Demographic and Lifestyle Shifts There are sociological explanations for housing inventory limitations as well. For instance, younger generations have gravitated toward major urban areas, and the subsequent population boom curtails the available residential real estate. A similar effect can be observed in some suburban communities because the rise of remote work has enabled greater geographical flexibility. With more professional workers working from home full-time or a few days per week, there's a greater demand for single-family homes that can accommodate home offices and workspaces.

Despite higher mortgage rates and inflation, there is still a strong demand for homes. Millennials and Gen Z are in their prime homebuying age, and they're looking for homes to support their families. Remote work opportunities have made homes more desirable than comparatively smaller urban apartments. Employment numbers are strong, and many hopeful buyers feel they have the means to purchase a new home.

So what does all of this mean for real estate price trends? It's straightforward economics: strong demand and limited supply sustain higher prices. But is that the whole story?

Reasons for Elevated Home Prices

Home prices throughout much of the United States surged from 2019 to 2022, and they have continued to rise since, if not at the same breakneck pace. The National Association for Realtors announced that home prices hit an all-time high in December 2023. What is driving elevated prices?

Of course, the constrained housing inventory is one of the primary drivers of high home prices. At the risk of oversimplifying, there are fewer homes than people who want them, and sellers can command higher prices.

But there are other factors at work. One is that people tend to think of real estate as safe, secure, and reliable long-term investment opportunities. Historically, home prices have been steadier in the face of economic instability. And while there are some regional examples of real estate dropping precipitously in value, most locations with strong real estate markets have remained desirable places to live. In short, American towns and cities have inertia and are resistant to financial shocks in real estate.

Another consideration is the unpredictability of mortgage rates. The Federal Reserve increased interest rates over a period of a year and a half to combat inflation. More recently, the Fed has kept rates where they are and signaled that rate cuts are in store for 2024. The changes to interest rates and economic volatility more broadly can invite real estate speculation, driving prices higher. 

2024 Real Estate Market Predictions and Projections

We've found our footing and know where we stand right now. But what does the rest of the year hold? Will housing inventory increase? Will prices remain elevated? We can make an educated guess by synthesizing historically consistent annual real estate trends with financial and economic expectations for the remainder of the year.

Let's first examine annual fluctuations in the real estate market. Typically, home sales slump in the late fall through the winter, picking up again in spring and peaking in the summer and early fall. There are a few reasons for this reliable phenomenon:

Weather - The cold temperatures and snow and ice keep much of America indoors in the winter. Buyers are less inclined to attend open houses. Sellers put off exterior home improvement projects that could increase home values. It's of course possible to buy or sell a home in December or January, but the market, as a rule, slows.

Curb Appeal - Relatedly, the leafless trees and slushy lawns of winter don't lend themselves to showing a property's aesthetic potential. A home's curb appeal increases substantially when spring blooms are in full display and the lawn and trees are vibrant green.

School Calendar - Families with young children tend to not disrupt their schooling with a move. As circumstances allow, homeowners with kids generally prefer to move into a new home before the new school year begins.

Holidays - Most non-seasonal industries get a little sleepy around the holidays. People travel to see family, take vacation, tie up loose ends at work. Negotiating a real estate transaction is usually pushed to the spring.

Regional fluctuations notwithstanding, this market trend points to an uptick in home sales as we move into the summer of 2024.

Also, consider current events: The Federal Reserve has suggested rate cuts this year. The National Association of Realtors agreed to rules that would curtail expensive realtor's commissions. The federal government is openly discussing making homeownership more achievable, and the Biden administration has floated the possibility of a $10,000 tax credit to support new homeowners.

This news may stimulate the market somewhat. Lower rates would incentivize more buyers, and sellers may not feel quite as reluctant to give up low mortgage rates that they locked into years ago. More manageable commission fees could assuage the fears that many buyers have about the upfront costs of real estate transactions. And federal policy, if it comes to pass, could certainly stimulate home sales.

Ultimately, though, you can only buy what's for sale. If the housing inventory remains limited, home sales will continue to lag. We'll likely see a reasonable uptick in real estate transactions in the summer of 2024, and prices will probably remain steady, but an astounding spike in sales is unlikely.

How Home Sellers, Buyers, and Realtors Can Adapt

If you're planning on selling your home, the market is in your favor. But don't necessarily jump at the first offer to come your way. It pays to be measured and collected to get the best deal on your home.

Homebuyers should stay vigilant. Things are starting to look better for buyers, but challenges remain and prices are high. Be patient. Resist becoming embroiled in bidding wars that overextend your budget. Find a trusted realtor who will find you a home that matches your lifestyle.

And real estate agents? This is a perfect time to hone your skills to remain competitive in the market. Network with contractors, interior designers, and other home professionals to pursue referrals. Use a realtor's checklist to ensure you're doing all you can to market yourself and make the most of each transaction. Offer buyers incentives, like home warranty coverage, to build your business. 

Regardless of where you stand in relation to the market, stay informed. And when you do have a home to care for, ensure its protection with a home warranty. Call the Liberty Home Guard team at (866)-936-9559 to learn more.

Home Warranty
Provider In America

Give buyers and sellers the best protection
at great prices!

  • Request proforma invoices and submit orders for new policies.
  • Elevate your business.
  • Manage your policy in our Realtor Portal!
Become A Partner Today

 

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