Happy New Year! Much has changed over the past 12 months and last week we revisited my predictions for 2023…..some hits and some misses, but isn’t that the way it always goes? This week we are going to look through the windshield at what I see coming for 2024.
So here we go!
Let me also say that there are no guarantees that any of this will or will not happen, but here is my best stab at what I “think” might happen….plus its fun!
1. Prices will at a minimum hold strong, but likely will continue to increase!
It will boil down to simple supply and demand dynamics. Unless homeowners decide to opt out of their 3% mortgage loans for newer/better the uptick in inventory will remain on the lower side of what the demand is…..thus causing prices to maintain at near or at historical highs and increase if demand outweighs supply. The cure for more inventory is the same as the cure for an increase in buyer demand, Lower interest rates. The number that has been reported that will cause buyers to “get back in the game” is 5.5%, so if interest rates get to where buyers start to re-enter the home-buying market the question will be if that is low enough to move the needle for sellers. If not, then prices will rise and let the competition begin……again!
2. Interest rates will be 5.5%’ish by mid-summer.
With current interest rates in the low to mid 6% range, I fully expect by mid-summer to be in the mid to upper 5% range. As we move through the early part of the year we will see rates improve, helping home affordability……AS LONG as sellers reciprocate and start engaging in the process of selling their existing homes. With inflation apparently cooling, I believe the FED will continue to pump the brakes and reverse the interest rate hikes we have seen and personally I believe that the last Fed meeting caused the market to proactively react to the change of tune with rate hiking and unexpectedly and proactively start the conversation on rate reductions…….some of what we have seen has been a “betting on the come” on that rate reversal. We shall see…….
3. Inventory levels will remain tight……a bit higher, but still nothing near pre-pandemic levels.
I am predicting that homeowners will determine that 5.5% is not enough to get them to bail out of their current sub-3 % mortgages and thus inventory will remain tight. It will loosen up to some extent, but not enough homeowners will cross the street into home selling based on interest rates alone. Any significant change in inventory will need to be boosted by either life events that dictate a change or an acceptance that rates will not change enough in the near term and they are just tired of waiting. It is entirely possible that the “waiting game” will become tiresome enough that we see more owners sell than predicted. Patience is not something humans necessarily do well and if patience starts to run out……we might see a marked increase in inventory.
4. Single-family new construction development will increase because buyer demand sees a significant uptick.
With the run on multi-family development and construction over the past several years we will see a muted whipsaw effect to single-family living development and construction. I still believe that most people living in western Colorado want their OWN home and property, thus we will see new single-family construction make a comeback…..as long as it can be done on some scale that makes is “affordable”. Homeownership is still the American dream…..regardless of what we are told we want or should learn to accept.
5. Rental rates will see a decrease!
Again, this is a simple supply and demand prediction. We have seen an astonishingly high number of apartment/condo complexes being built over the past 3 years with many more on the horizon……eventually, we will hit a situation of oversupply and over-saturation, which I believe we are nearing. This environment will create competition which will lead to a potential decrease in rental rates….with one caveat. What was $2000 a month will be $1800, but what was $1350 will continue to be $1350 as most of the new developments were built with the upper-end price ranges as the target! True affordable rental units are still not easy to find.
6. The Alabama Crimson Tide will rightfully take back their place as the NCAA National Champions in Football and the Denver Broncos will keep Russell Wilson on board and he will return to his old Pro Bowl self!
One of these is a stretch and one of these is absolutely wrong……check back next year and let’s find out!
I know some of these predictions are “low hanging fruit”, but meaningful fruit nonetheless for our local market. We are blessed to live here and not a day/week goes by that I am not thankful to live in Wester Colorado. Savor it…..it does not get much better than here. If you do happen to find somewhere better, please let me know!