So far 2023 has been difficult for the housing market. A combination of factors including inflation, low supply and soaring mortgage rates have left many homebuyers and investors on the sidelines. Indeed, mortgage rates hit their highest point in more than 20 years, with the 30-year fixed-rate mortgage averaging 7.09% on Aug. 17, according to Freddie Mac.
But what will 2024 look like?
“Mortgage rates have been on a bumpy ride in 2023, and the overall direction since January has been higher,” said Danielle Hale, Realtor.com chief economist. “Considered another way, however, mortgage rates have essentially held in the 6-7% range that they established in the last quarter of 2022.”
In turn, Hale said that Realtor.com’s expectation is that the 7% rates of late will once again act as a ceiling for mortgage rates.
“With inflation easing further and the labor market cooling, we expect that the Fed has likely raised rates for the last time, and this will help long-term rates, including gradual,” she said.
According to James Allen, founder of Billpin.com, mid-sized tech hubs have been on the rise for a while now.
“As tech companies continue to decentralize from Silicon Valley, these cities offer a blend of affordability, infrastructure and a growing tech talent pool. Think of them as the ‘Silicon Suburbs,’” he added.
The sentiment was echoed by several experts, who said that these mid-sized cities will also be very hot if they have good economies, jobs and are well connected by transportation.
“Markets such as Austin, Charlotte, San Diego, Orlando and Tampa will gain momentum next year,” said Dottie Herman, vice chair and former CEO for Douglas Elliman. “These hubs will grow because they can provide a more peaceful quality of life or if you are raising a family and don’t want to be in the middle of a major metropolis.”
Cities such as Raleigh and Charlotte have a relatively low cost of living and healthy job markets and will be ripe for investors in 2024. Based on New Western investor activity, Greensboro could also see a surge in activity in 2024, said Kurt Carlton, co-founder and president of New Western.
According to Jackson Simon, general partner of Simon Stevens Residential Fund, the top market to watch for investing opportunities in 2024 is Louisville. The median price of a home nationally has fallen to $416,000 in the second quarter of 2023 from an average of $479,500 in the fourth quarter of 2022, according to data from the St. Louis Fed, he said.
“Higher interest rates are making more affordable cities like Louisville more attractive for homebuyers and investors alike. Inflation is hitting the wallets of Americans, and we are seeing the lower-cost housing segment appreciate more on a percentage basis, in contrast to the higher-end segment, which is appreciating but not to the same degree,” Simon said.
He also noted that the growth of remote work as a viable option for many has made Louisville an attractive destination for digital nomads.
“In 2023, the national population growth rate was 0.5%, while Louisville’s was 0.81%. I believe Louisville will remain a market to watch over the next year,” he said.
According to Allen, there will be a Rust Belt revival, and cities such as Pittsburgh and Cleveland are undergoing a renaissance.
“As industries evolve, these cities are leveraging their rich histories and reinventing themselves with modern amenities and job opportunities. It’s like turning an old, forgotten vinyl record into a chart-topping hit,” he said.
According to Realtor.com, the Midwest is expected to continue to see the greatest housing activity as relative affordability boosts its appeal.
The Wall Street Journal/Realtor.com Summer Emerging Housing Markets Index, which identified the best housing markets for home ownership, found that 14 of the top markets on this list have an ideal balance of economic and quality of life factors that are likely to continue to draw in residents — homeowners and renters alike, Hale said. In addition, they have housing market conditions that indicate that demand outstrips supply, a precursor to rising housing prices that will help an investment pay off, she said.
“The list is decidedly Midwestern this quarter as affordable housing markets are expected to outperform pricier areas in an era when housing costs continue to run high and elevated mortgage rates up the ante for the vast majority of buyers who take on a mortgage to purchase a home,” Hale said.
“It’s best to invest in prime markets that have a strong track record of resilient performance during previous economic downturns,” said Ran Eliasaf, founder and managing partner at Northwind Group, a real estate private equity firm.
According to Eliasaf, New York City has consistently demonstrated its resilience — during the 2008 financial crisis, for example, the city’s real estate market experienced a mere 10% price drop compared to the national average of 30%.
“Further, the limited space for new development and stringent zoning regulations create a large barrier to entry that further contributes to the city’s reputation as a safe bet for price appreciation,” Eliasaf said.
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