Happy New Year!
I hope you were able to take a well-deserved break over holidays!
The 2023 housing market has come to an end and last year can best be described as "difficult". Now, not only are home prices high, but interest rates peaked at 7.79% in mid-October making affordability a major issue, especially for the 1st time home-buyer. Because rates were low for so many years, approximately 85% of current mortgage holders are locked in at sub-5% rates. This has created what has been termed a "mortgage rate lock-in effect" with many home-owners staying put to avoid moving to a higher rate mortgage. This phenomenon has dramatically shifted what would have probably been a gangbuster year for home prices, to one with decreased number of sales and only moderate price gains. In Monmouth County, the average price for a single family home rose 5% and there were 19% less homes sold last year.
But will things improve this year? I'm not sure "improve" is the best way to describe what I think will happen. There are certainly signs that the market conditions are loosening up a bit. Buyers seem to be getting used to the idea of higher rates with the plan that they can refinance at some point in the future. They are also looking at programs like adjustable rate and interest only loans that can help to make the short-term a little less cost-prohibitive. Mortgage rates have been dropping steadily in recent weeks and they are expected to continue at their modest downward trajectory. Most experts are predicting rates declines down to somewhere between 6%-7% in 2024. The lower they go, the crazier the housing market will become.
What does that mean for the real estate market? I expect the the local real estate market will heat up again this Spring and going forward throughout the year. We will probably end up in a similar situation that we were in prior to the interest rate hikes, where there was little inventory because there were many buyers searching for a home and sellers without an exit plan (this is here I can help you!). I believe that the housing shortage will continue, and to some extent (depending on rate drops) prices will renew their upward climb with multiple offers again creating a frenzy-like atmosphere.
If you have more questions, and want to discuss your specific concerns about the market, always give me a call or text, I am happy to answer any of your questions.
Click below for a list of 4th quarter home sales and more detailed market information.