What’s the housing market going to do in 2024? Nobody has a crystal ball, but here are some emerging trends. Scroll quickly by topic or digest slowly.
UPCOMING (PUBLIC) SPEAKING GIGS:
01/12/24 Prime Real Estate (private event (I think))
01/17/24 Gateway Event (private)
01/31/24 Joel Wright & Mike Gobbi Event 9am (on Zoom here)
2/09/24 PCAR WCR Event (11:30am-1pm (more details))
2/13/24 Downtown Regional MLS Meeting 9am
3/11/24 Yolo Association of Realtors (YAR only)
3/26/24 Orangevale MLS meeting 9am
4/11/24 Lindsay Carlisle Event (private)
4/25/24 HomeSmart iCare Realty (details TBA)
NOTE: The housing market isn’t the same in every part of the country. I hope you get some value here, whether you’re local or not.
THINGS TO WATCH IN 2024:
The market will be far from normal: Last year we were missing a significant portion of both buyers and sellers, and this year is poised to be similar with low supply and low demand. The hope is to get some of each category back, but that hinges on what happens with rates, inflation, and the economy. Lately rates have gone down, and that has helped some, but we need to see a much bigger change to affordability to see a more meaningful difference in buyers and sellers participating. In other words, a modest dip in rates only creates modest results. If I had to guess, it’s possible we can see an uptick in buyers and sellers this year, but I don’t expect volume numbers to be anywhere close to normal. I could be wrong, but this is what stats are pointing toward. Time will tell.
The insurance crisis will become a bigger deal: It’s been a real mess with rising insurance rates in places like California and Florida in particular (lots of other areas too). Let’s watch how this affects homeowners, affordability for buyers, and investors with shrinking profit margins.
Vibrant new construction: The new homes market was glowing compared to the existing sales market last year in terms of volume, and this year builders are poised to do well again in light of a lack of supply in the existing resale market and the ability to buy down the mortgage rate.
Continued pressure on prices not crashing: I would expect to see a modest price uptick in the spring because that’s normal almost every year, but it’s hard to predict what prices will do the entire year with so much uncertainty, so I’m not even trying. But backing up, the market is in a weird place where supply and demand are really tight in the midst of a glaring lack of affordability. It would be very healthy to see prices come down, but supply has been way too tight to see prices crash. On that note, it was stunning to see volume at basically worst-ever 2007 levels last year locally, yet prices didn’t tank. Think about that. We saw some of the worst volume ever despite population growth since 2007, but prices didn’t plunge dramatically. Frankly, I thought prices were poised to go down more significantly in 2023, but then 40% of the normal number of listings did NOT come to the market, and that changed the trend. I had a local city councilmember ask me about this. The idea was, “Why haven’t prices plummeted? I thought that would be happening.” Well, supply is artificially constrained from Fed policy, and having such anemic supply has helped keep prices higher. It’s abnormal to see this dynamic of low supply and low demand. The trend would be much different if we had high supply and low demand.
NOTE: This doesn’t mean prices can only go up in the future, and I’m not a fan of that narrative since we are in new territory here with so many sellers sitting. I’m just saying prices thus far haven’t been able to crash like so many have wanted or predicted because the market has been so tight. Prices could easily decline if rates tick up instead of go down, so rates are quite the x-factor in what prices do this year.
Off-market transactions will be a thing: I don’t have an easy way to gauge off-market deals, but anecdotally they seem to have increased last year. My sense is the market got really tight, and some sellers didn’t want traffic through their homes, and some buyers out of desperation were finding transactions before they hit MLS. I expect this to continue in 2024 as long as supply and demand remain compressed.
Choosing comps will be more difficult: One of the struggles in today’s market is comps are sparse. Think about it this way. Locally we had about 11,000 fewer sales last year from the pre-2020 normal (that’s about 40% fewer). This effectively means there were 11,000 fewer comps available. Yikes. That certainly makes it much more challenging to value properties.
Lifestyle buyers and sellers will be on the move: Just like last year, we’ll see lifestyle buyers and sellers on the move. Divorce, death, moving up, moving down, retiring, buying a first home, moving out of state, relocating, investing, etc… In 2023, the local market saw nearly 40% fewer buyers from the pre-2020 normal, which is sobering. However, I want to emphasize that 60% of the market happened. My sense is sometimes people talk about there being 0% housing demand, but that’s fiction. Yet, let’s not gloss over 40%. Imagine taking a 40% cut in pay or losing 40% of your body weight. This is a glaring number.
A market where expertise is required: Everyone feels like an expert when things are good, but true expertise shows up when things aren’t so good. As we look to 2024, it’s going to be an opportunity to flex market knowledge, find creative ways to get deals done, and stand out as an expert. My advice? Cut through the noise, focus on the part of the market that is happening, and be a resource for consumers. If it helps, I pushed out a free spreadsheet to make neighborhood graphs.
Some people are maybe too certain about the future: Here’s a meme I pushed out yesterday, and this says it all. “Bro, I know I didn’t get it right last year, but this year I’m right.” That’s the sentiment with rates and other predictions, and I think overall many people are feeling pretty confident about predicting the future of the housing market right now. Frankly, the start of 2024 reminds me of last year where there was so much optimism and hope since rates were going to go down… Look, there is nothing wrong with talking about the future, and there’s certainly nothing wrong with an optimistic view in life. I just think things get iffy when people start promising the trend and speaking in such definitive terms about what is going to happen. My advice? Be realistic about the market, form ideas based on data, talk about future possibilities, cultivate optimism in life, and be careful about letting hope for change cloud your perception of the housing market.
Realizing we’re in this for longer: Sellers sitting out of the market is not a temporary thing for just a year. This is going to be a longer process, and 2024 is likely going to reinforce that. The truth is we have a new normal in housing right now where volume numbers just aren’t going to be what they were. The thing is we don’t know exactly how long this will last because we are in the mist of the trend. It’s going to take time to understand all of this. For now, we are in a season where supply is poised to be subdued until there is more affordability or a mechanism to cause owners to sell.
Doing to Gen Z what was done to Millennials: I saw a headline the other day from Fox Business about Gen Z wanting to rent instead of buy, and it reminded me of the narrative regarding Millennials. For so many years people talked down about Millennials saying stuff like, “They only want to eat avocado toast instead of buy a house.” Yet, Millennials are currently the largest generation buying homes today, so that narrative didn’t pan out. In short, I don’t buy the notion that Gen Z doesn’t want homes either. Granted, affordability is a massive issue, but affording a home is something far different than wanting to own a home. I think some of this narrative springs from a generational pecking order where it’s common to speak down about whoever is coming next. You know, let’s not do that. We can do better.
Blaming big investors: It’s en vogue to blame institutional investors for the housing crisis we have right now. I’m not saying we shouldn’t talk about investors or give them a pass. I’m just saying they are an easy target, and sometimes a laser focus from legislators on Wall Street investors can distract from focusing on other issues like creating more housing supply and promoting affordability. This year I expect more conversation about this, and I know it’s a huge issue since the map I created showing what Invitation Homes owns in California has been viewed nearly 70,000 times in the past two weeks. By the way, here’s a one-hour segment I did with KQED on the subject.
The color of the year: Pantone‘s color of the year for 2024 is called Peach Fuzz. Okay, I don’t think Pantone colors shape design for the housing market, but the idea of more color is welcome after years of intoxication with gray. I’ve heard a few people say Peach Fuzz has 90s vibes, which is interesting since 90s fashion is in style right now (you know this if you have teenagers). Anyway, what are you seeing in new construction lately? More color? Less color?
Credibility will be won and lost: Some real estate professionals are going to gain credibility and others will lose it this year. Some folks are going to get caught making predictions that don’t come true, and it’s going to be a bad look.
More conversations about zoning: In various states we are seeing conversations emerge about zoning reform and increasing the number of units allowed on each parcel. In California we’ve seen SB9, and this year we have a new law giving space for a single family home and ADU to become a condo so the ADU can be sold separately. All I’m saying is there is some creativity brewing, and zoning is a really big topic that can affect change. There will be some real estate professionals and tech companies who study this, understand it, and make money off the change too.
Not so easy to be a real estate professional: 2023 was a brutal year for real estate professionals since volume was so low. The truth is volume pays the bills – not higher prices. Anyway, if volume improves this year, that will help somewhat, but volume is still poised to be lower unless we see a sharper improvement to affordability, so I would say to expect to work harder, get creative about finding deals, stay in front of people, make it all about building relationships, share your knowledge, and build a bigger network. Gone are the days of 2021 where things came easy.
Taking mental health seriously: I want to end on this, which is something I shared last year in my housing outlook. I think some people this year are going to need to opt out of real estate conversations for the sake of mental health. If you’re feeling depressed after reading articles or social media housing posts, maybe it’s time to distance yourself, do some inner work, or unsubscribe (even from my blog). My advice? Take your mental health seriously by cultivating contentment regardless of what the housing market is doing. If you’re only happy if the market is up too, that’s something to put in your pipe and smoke (figure out). I find it’s hard today to stay grounded in today’s world with so much sensationalism and such a lopsided focus on what the future holds. The wild part is mostly everyone is wrong about their predictions, so there is so much worry wasted on stuff that often doesn’t pan out (think Y2K). The sobering part is people are losing joy today because of what the future may or may not bring. Moreover, if you’re listening to voices promoting real estate doomerism, maybe it’s time to step back and assess the credibility and intent of that message. If it’s one thing after another that’s going to potentially crash the market, maybe there is an agenda and you are the target. I know this sounds silly to some for me to mention, but this is real stuff. It’s easy to get entrenched into incessant negativity or fear of the future, but that’s just not healthy. Friends, let’s keep our eyes and minds open, but please be intentional about taking care of yourself. Nobody else can do that for you.
Thanks for being here.
Questions: What do you think is going to happen this year? What stood out to you most above? What do you agree or disagree with?
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Happy new year!
Thanks for a thoughtful look forward to 2024. I think uncertainty will be the theme for this year for all of the factors you mentioned plus the big one you didn’t -the election.
Thanks Joe. Yeah, there is still a ton of uncertainty out there, and it would be wise to concede that. Some of the ultra-optimistic views of this year seem to ignore that. The truth is there could be other factors not even on the radar that end up affecting the housing market. I didn’t mention the election since I wrote about that recently, and any real effect on the market is sometimes hard to gauge. In terms of politics, I will say I plan to be intentional to know the issues, but I’m going to be intentional about not getting sucked into the daily drama too. For any onlookers, here’s something I wrote about presidential election years in real estate: https://sacramentoappraisalblog.com/2023/11/08/the-housing-market-during-a-presidential-election-year/
well done and very thorough. maybe the market will open up a little from a variety of avenues. units, rates, more advantages for first time and primary res buyers. there is definitely shadow demand and supply building that should show up in the market when conditions are right. the question is when and what are those triggers. its hard to see what could cause a massive shift downward in prices/affordability but the future is unwritten and we will all have to wait and see.
Thank you Brady. Totally agree on your last sentence especially. Lately we have been matching new listing levels from one year ago, so that’s why I’m a bit more inclined to think we will see an uptick in volume. Only time will tell. There are some stats behind my idea here though. I’m eager to follow listings very closely this month, and I’ll be updating a particular image every week to track things real-time. Last year was lackluster. Will we outpace it? Can’t wait to see.
Always interesting to hear your take. Looking forward to 2024, regardless of what it has in store for us. Hopefully a bit more volume.
Thanks Gary. That’s the hope. And now we’ll see what happens.
Thanks for reminding us about mental health, Ryan. I personally had to exit all social media forums about appraising due to the extreme negativity rolling off many posts. I found myself checking them daily and it was not healthy. I appreciate that you have always been an encourager in our industry.
Thanks Kyle. And good for you. I actually did the same with most big real estate forums on Facebook. Appraisers were just getting roasted every day, and it wasn’t fun to be a part of. I’m here to serve and to be a resource. I love answering questions too, and I’ll bend over backwards to help convey concepts. But not in that context. Too much toxicity. Here’s to being healthy this year in many ways (and me dropping twenty pounds (haha)).
Kyle – except for the professional ones, like LinkedIn….I have not subscribed to any social media forums, since DAY ONE of the WEB… Full disclosure: I was deep inside the DOT COM world from 1996-2001, as CD ROM developer and Senior Producer for educational websites and instantly could see the negative effect of social media… even before FACEBOOK arrived!
I’ll say I get a ton of value on Facebook and all social platforms I am a part of (Instagram, Twitter, LinkedIn, Facebook, and Threads). Just not on some of the forums. People get way too toxic and sometimes forget how to be decent. No thanks. Congrats on being an early adopter. You practically invented the internet.
I wanted to do an open house on a property around the $600K range this weekend. It’d just hit the market.
Listing agent: “it is pending, we are the only property for sale in that subdivision.”
They got multiple offers and over asking. I think the beginning of 2024 will be a bit euphoric and then back to normal – like 2023. But that just my feel of the market.
Thank you for sharing Tarah. I appreciate hearing your perspective. My sense is buyers wake up before sellers at this time of year, and that’s what we are seeing right now (for reasonably-priced homes of course). We’ll see what the rest of the year brings. Keep me posted with what you’re seeing.
Great article, Ryan.
A couple of comments…
In the 20+ years I’ve been in business, and even before that, I’ve been paying attention to market predictions from both experts and regular folks.
It seems that no matter what the market is doing, there are more pessimists than optimists, and the pessimists are always predicting a crash…
If the sky isn’t falling, it’s about to.
If the market is slowing, it’s gonna get worse.
When prices are recovering, it’s only temporary.
It’s like the people who predict the end of the world. Someday, they’ll be right, and I imagine they’ll proudly shout, “I TOLD you so!”
Meanwhile, we can only deal with the market at hand.
On another note on the thing where they say that Gen Z doesn’t want to buy homes: Gen Z is described as birth years from the late 90’s to about 2010. That would make the eldest of them about 25.
They want to party, travel, eat, drink and act irresponsibly?
How strange for young people to want that.
They don’t want to make commitments or be saddled, how unusual!
Throughout history, I’d bet if you asked people under 25 if they wanted to buy a home, the majority would say ‘no’.
5 years later, they’re forming households, have careers going, want to settle down… and buy a house.
They’ll be alright.
Thanks Steve. I always appreciate your take. You are right. There are always predictions, and there are always extreme predictions too. It’s very difficult to predict what prices will do this year. It seems reasonable that volume could improve a bit, but we don’t really know. It’s a very strange housing market at the moment with artificially low supply. Weird vibes. The one thing that makes predicting so different today is having profound access to real estate data and a platform to communicate instantly to people. Does that make predictions any better? I’m not so sure. It certainly makes it more interesting for conversation though.
And yeah, younger people should like to go out and have a good time. If anything, young people look at some older generations as what they don’t want to be also, but that’s a whole different thread. As a dad of two Gen Z kids, I’m a fan of the generation. I’ve appreciated the friends my kids bring over too. This generation is okay to say the least.
Ryan, always awesome, however, I just downloaded the neighborhood spreadsheet and am THRILLED. I have my own exports but not with all your fields. Thanks for making my job easier. See you soon (USPAP) with the gang.
So awesome. Let me know if you have any ideas for how to make it better. I plan to eventually do a version three. I’m wondering what else we can visualize. I’ve actually been having fun using this spreadsheet during appraisals. I feel like I’m getting a better view of neighborhood trends. Hoping others get something out of it too.
Looking forward to a year of low business, taking it easy, mountain biking, playing with my dog, and making new friends (and maybe some new cocktails). The leisured life of someone with no kids and a refi.
Love it. I feel relaxed after reading your comment. Haha.
Ryan — Great 2024 opener ! Waiting to hear your take on the rise of ADUs, based on the massive CA. legislative rules and regulations signed into law, since 2020… can ADUs provide a path to easing the housing crisis?
Full disclosure: I built a Junior ADU on my property here is Sonoma County, and the regulations were very challenging in 2019… and I did not finish the project, till the 1st quarter of 2021 !!!
You know too well that the costs are too high to ease much of anything. Most people who can afford to build one don’t need the rental income.
Thanks Bruce. ADU permits have really taken off in California, so this can help. Clearly this is meeting a felt need. I’m not as bullish about this solving the housing crisis though. I think it’s great to build more ADUs, but let’s also unleash single family detached units, condos, apartments, 2-4 units… I concur with your sentiment. It is a train wreck. A neighbor built one recently, and it was a madhouse to get it done because SO many different organizations had a hand in the process to sign off on permits. It was stressful and ridiculous to watch. Frankly, I think that’s about how it goes in most situations. It’s likely to take longer than expected and be more expensive than expected. I have never heard of an ADU being easy to pull off. Sorry to hear it took you so long, and I have to say I hear stories like that all the time locally.
Over time we should see this become more efficient though, and I expect some tech companies will try to come to the marketplace with the idea of doing a smooth ADU build. We’re just not there yet. What a viable product that would be though!!! Another problem is how expensive they are to build, so it’s not always easy to get a loan for an ADU in light of cost vs contributory value. One last thing. Placer County locally has some free plans for a few ADUs on their website, and I think that’s a great start in the right direction to make this easier.
Hey Ryan!
I was just chatting with a gentleman I met at an open house. He just saw I had listed a property in Carmichael and wanted more info. I shared with him the information I had and then he said, “My wife and I are retired and we don’t want to get involved in a bidding war.” I shared with him that, for the most part, we aren’t seeing the kind of bidding wars we saw a year ago. A “bidding war” might be 2 offers. Tiimes are changing.
I also watched a special on “Renting vs Buying”. They should have picked a different person that really was an expert because he wasn’t. He touted that it was better to rent because tenants don’t have the upfront costs of paying commissions to sales agents when they rent. So far, it’s rare that a buyer pays their own commission, although that may be coming. That is just an example of how much disinformation is out there…and people are basing huge decisions on these “experts”. I encourage people to interview A LOT and then make an informed decision…don’t take one person’s word for it.
Thank you for a thought provoking blog!
Such a great distinction to parse bidding war might not mean the same thing today. I track the percentage of multiple offers very closely, and this is a solid point for me to consider when talking trends. I actually just had an email from a seller who asked me about commissions too. Lots of room for education this year. Thanks Paula. And happy to do a Zoom for your office. Let’s set something up.
Thank you for your insight Ryan!
Thanks so much Amy. Happy New Year!!!
Great article Ryan. Your words are very appropriate and useful for the start of another year in the “real estate world.” As the comments here have addressed the biggest issues you raise, I offer a comment on Pantone’s Color of the Year :-).
I showed new homes under construction recently and the exterior colors chosen were conservative and appropriate for the neighborhood. But one front door stood out – it was very close, if not exactly Peach Fuzz – haha! Very unexpected, but very interesting and didn’t look bad in my opinion.
In real estate, as in life, it helps to take any quotient of fun where you find it. Have a good year, and thank you for all you do!
Haha. I’ll have to keep my eyes open for Peach Fuzz doors. Thanks Melissa. I appreciate you.
Happy New Year Ryan!
Once again your Professional perspective is “On point” and so welcomed for the coming year. I most appreciate your sense of humor, intentional optimism (which by the way shines in your blog) and your generous spirit to keep us well informed with the Stats, graphs and knowledge that you share with us!
I am so happy and grateful for the work you do! You have helped me more times than I can count and you make me feel like you are on My team!
Thank you Ryan
PS: For me 2023 started out challenging however I had an outstanding close to 2023.
Optimism and pessimism are mindsets — ways of thinking and seeing things. Optimists see the positive side of things. They expect things to turn out well. They believe they have the skill and ability to make good things happen. Bring it 2024!
This is great. Thank you for the kind words Andrea. I sincerely appreciate it. It’s nice to get some encouragement since encouragement fills the emotional tank so to speak. Congrats on a successful year overall. That’s good to hear. Totally agree about mindset.
I’m in Sacramento. Bought a 3/2 home in early 2022. I would eventually like to sell this place in a few years or later, and get a 2/1 house again. I like those early 50’s small cottages. I look every now and then to check listings; there is NOTHING for sale in Sacramento. One houses listed for sale entire zip code here. And what is listed for sale is still priced too high for condition of the home and the neighborhood it’s in. Nothing is going back to “normal” if the Government doesn’t quit interfering with home owner’s financial situation and their loans, no one is going to sell if they don’t drop rates. A 5% rate was a good rate 20 years ago. It’s too high when small homes 900sf-1200sf homes that need work in an “ok” neighborhood are still selling for $400-450k.
Thank you Carol. I appreciate you pitching in here. We really do have a problem with sellers being stuck in place. I think many people feel exactly the same as you when looking at prices in the midst of current rates.