On Thursday, January 18, we hosted our annual Market Outlook event. Dr. Lawrence Yun, National Association of REALTORS®, provided the residential outlook while Brandon Svec, CoStar Group, provided commercial predictions.
What can you expect from 2024? We gathered our top takeaways from the event to help you get a jump start on the year.
We’ll see more sellers in the market.
According to Dr. Yun, potential sellers in the market have been able to hold on selling their current homes. However, over the last two years, life has continued — children were born, marriages and divorces continued and desires to downsize and job switch still exist. These potential sellers are realizing they cannot wait any longer to sell.
With the help of interest rates declining closer to 6%, more homeowners will make the move to sell and find a home that has grown with their lives. This, Dr. Yun predicts, will help new home sales to increase to around 19% and existing home sales to go up to around 13%.
Interest rates have peaked – but don’t expect to see anything near 3% again.
In October, mortgage rates hit a high of 8% and have decreased little by little since then. By early spring, Dr. Yun predicts mortgage rates will fall to the range of 6 to 7%. What’s causing this anticipated drop?
- Rents are softening with the increase in apartment construction.
- Community banks are struggling due to the high interest rates.
- The spread between the 10-year treasury and 30-year mortgage rates is abnormally high.
However, when asked if we will ever see 3% mortgage rates again, Dr. Yun definitively said, “Not in my lifetime.”
Commercial asset classes are facing individual challenges.
According to Brandon Svec, in many areas of the country, rents in the multifamily market have started to fall due to too much supply and not enough demand. Nationwide, vacancies remain around 7.5%.
However, when it comes to the office sector, we are seeing a decrease in demand. How bad is it? According to Svec, we’ve seen a decrease in office demand in nine out of the last 12 quarters. And, based on sublease availability, Svec predicts that this is an issue that will continue in the future.
While retail has been the best-performing sector of the commercial market over the last few years, supply remains low, and many retailers are complaining about needing more space.
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