Chicken Little has been shouting into his little megaphone all week. Anyone would be forgiven for thinking that the sky was actually falling this time, given the recent rise in rates to over 7%. Mortgage applications are understandably down, leading many to sound an alarm that the bustling spring market we predicted won’t materialize. However, despite its many current challenges, the NAR found time to collect the data needed to calm us all down. Not only did home sales increase in January, but so did inventory. Of course, it’s not all 100% rainbows and unicorns, but I argue that today’s numbers keep the sky firmly in place and paint a picture of a real estate housing market that is slowly, oh so slowly, normalizing. Let’s break it down:
Housing Market Predictions as of February 2024
My housing market predictions are simple: January was a good month. February will be an “eh” month. You can quote me on that. But March is where I bet we will see more positive movement. The Fed decided not to raise rates at the end of January and I bet they will stay the course when they meet in mid-March. The Fed remains our General Patton in its epic 23-month-long battle against inflation.
If that’s the case, rates should fall below 7%, and buyers will stream back in. You have to remember, they’ve been waiting and waiting, but 7% is just too high for them. (In case the Fed is wondering, a recent Realtor.com survey found that the ideal rate for buyers is 5% or lower).
If buyers feel like rates are moving downwards, even slightly, then a high rate might be manageable until they can refinance. This might be the spring when buyers settle for not-great rates, with the hope of taking advantage of lower rates down the line.
To round out our snapshot of the market, inventory is up, but so are sale prices. Building permits were down from December but not substantially (up from January 2023). We might feel the effect of delayed housing starts in the future, as they were down almost 15% from December. But they were only very slightly down year over year. It’s hard to build houses in the snow, sleet, and freezing cold, right?
This data and what we dissect below give us a real estate housing market prediction of a slow, sloth-like recalibration. My money (literally) is on a pretty nice spring sales season.
What Does NAR’s Lawrence Yun Say?
While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand. Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.
February 2024: Is Now the Time to Buy a House?
Now might be the absolute perfect time to buy a home, especially if buyers are willing to take on a project—and you can help them negotiate.
One of the most interesting nuggets of data buried in all the reporting is the median days on market. The average has gone up to 36 days. But when you take a closer look, as Zillow kindly did, it seems that well-priced homes are flying off the shelves, lasting only 29 days. It’s the project houses, or the ones that are languishing for no apparent reason, or those priced laughably high that are sitting for as many as 72 days—and that is where you can make great deals.
However, this might not last. Buyers willing to take on a less-than-move-in-ready home might need to act fast. Even as inventory numbers rise slightly (according to NAR), they are historically down. According to Zillow, the active listings count was the second lowest in the past few years.
As spring warms up, my housing market prediction is that the competition will, too, and these opportunities will be even more limited.
As discussed above, inventory was up in January, according to NAR, to a three-month supply. Zillow feels differently, as their data shows a slump. While they’re not entirely sounding alarm bells, it’s kind of one step down from that—maybe like cow bells—they’re sounding cow bells. But I’ll let Redfin have their say, which is that new listings increased by 9.8%. So, two against Zillow.
Median Sale Price
The median sale price was up, year over year, by 5.1%, to $379,100. 💰 Home values continue to rise over the years, which is great news for sellers.
However, for context, it’s almost a whole percentage point lower than last month ($382,600). If you go back six months, the median price is down 6.8% from July 2023. While the headline continues to be that this is the 11th month in a row of year-over-year price increases, it’s missing the part where prices are slowly sliding back down, month after month after month. If buyers are asking if housing prices will go down, I think the answer is, for now, yes, but slightly. Much like last year, the summer will heat up, and we can’t bet on those numbers staying low.
In the Northeast, 480,000 units were sold: The exact same number as sold in November 2023, December 2023, and January 2024. So for the third month in a row, they don’t get a green arrow up or a red arrow down. Elsewhere, people were on the move. 🏃 The West saw the biggest sales increase, at 4.3%, and they can take an extra bow because last month they were also the big winners with a 7.8% increase. The South and the Midwest were up a decent amount (4% and 2.2%, respectively) after being in the red last month.
Magic 8 Ball: Housing Market Forecast for March 2024
Unless the Fed stops being Patton and starts being, I don’t know, Voldemort, March should be a good month. It’s the start of spring; sellers have been painting and prepping and are finally ready to pop their property on the market. Buyers are ready to jump off the sidelines and swallow those painfully high rates, hoping it’s a short-term problem.
And therein lies the rub: we can make all the forecasts we want for the housing market, but at the end of the day, it’s all in the hands of the Fed. I hope rates fall this month. But even if they don’t, I’d be shocked if they continue to rise to Halloween-era peaks. Every signal, every oracle, every pundit, every shooting star seems to agree that rates will fall this year and into next year. Let’s hope we’re all correct.
Latest Real Estate News for February 2024
What else are we talking about while at The Close watercooler (or in the #watercooler Slack channel)?
The NAR: Embattled…and Battling
The Wall Street Journal didn’t hold any punches in its piece last week, entitled “Realtors Are in Crisis—and Homeowners Could be the Winners.” NAR Interim CEO Nykia Wright countered the Journal with a public letter assuring us that while yes, the NAR has taken some hits, they are rebuilding and launching, sharpening and advocating, changing and learning, gathering and innovating, designing and transforming, driving and leveraging, protecting and ensuring, supporting and defending, collaborating and addressing, but mostly evolving. So that’s good. Everyone feel better now? The NAR is on it.
In an effort to bring more adults in the room, they’ve hauled in some familiar faces: Sharon Millet, who was president of NAR in 1999, and Vince Malta, who was president in 2020. One might question the wisdom of bringing back leadership from the past while NAR tries to “evolve to better serve our members, our staff, and consumers across America, and to lead our industry into the future.” But we remain, if not optimistic… hopeful?
About the DOJ…
The NAR continues to wade through state-level commission lawsuits, but the biggest threat looms from the Department of Justice (DOJ). In a no-holds-barred interview at the Crush It in Real Estate conference, recently-appointed NAR president Kevin Sears spoke the truth we’ve all known for four months, “look at the scoreboard: We lost.” He’s referring, of course, to Sitzer I Burnett, names that are probably now more familiar to you than the names of your nephews. The $1.8 billion judgment (which could increase to $5.3 billion when all is said and done) is a heartbreaker for sure. And no matter how much we cried out, “But you’re wrong! You got this one wrong!” —as Sears states, “We lost.”
Now, as bad as $5.3 billion is, Sears says there’s a much bigger and scarier monster behind door number two. The DOJ and NAR have been at loggerheads for years, but the conflict is escalating. As Sears explains, “They’re pissed off at us.”
As of last Thursday, we know that the DOJ officially advised Judge Patti Saris, who is overseeing the Nosalek case (one that concerns commission structures but names MLS PIN as a defendant, not NAR). In fact, DOJ attorney Jessica Leal suggested to Judge Saris that the proposed settlement does not go far enough and argues it could violate federal law.
Essentially, all of this boils down to one simple truth, put in exquisitely simple terms by Sears: “The way that we operate our business is going to change. It is going to change. Whether we embrace it and adapt or whether it’s forced down our throats.”
Like many of us, I find Sears’ comments refreshingly candid and encourage buyer agents to focus on articulating their value to clients and use a buyer representation contract. Cause times, they are a-changin’. But! We’ve got this.
Best Places to Live
We’ve been working hard on a deep data analysis of the best cities for real estate (watch this space!), but we’re also interested in seeing how the U.S. News and World Report broke down their 25 best places to live for quality of life. I won’t keep you in suspense – Ann Arbor got top billing, with Boulder, CO, Madison, WI, San Jose, CA, and Portland, ME rounding out the top five.
Their analysis considered many factors, including home and rent prices, affordability indexes, job market data, and migration numbers. It’s clear from the number of northern and western towns that it did not take into account annual snowfall. Here’s the complete list:
|1. Ann Arbor, MI
|14. Grand Rapids, MI
|2. Boulder, CO
|15. Fort Collins, CA
|3. Madison, WI
|16. Worcester, MA
|4. San Jose, CA
|17. Albany, NY
|5. Portland, ME
|18. Naples, FL
|6. Boston, MA
|19. Syracuse, NY
|7. Green Bay, WI
|20. Manchester, NH
|8. Hartford, CT
|21. Lancaster, PA
|9. Rochester, NY
|22. New Haven, CT
|10. Trenton, NJ
|23. Lexington, KY
|11. Boise, ID
|24. Providence, RI
|12. Washington, DC
|25. New York, NY
|13. Raleigh/Durham, NC
Bringing it All Together
The January numbers were better than expected. My housing market forecast is that February will be blah. But March. March, April, May, that’s where I’m focused. Fingers crossed, the Fed will be happy enough not to raise anything. And we’ll get to keep riding this slow train to normalcy and a more predictable market.