In 2023, the housing market faced significant struggles thanks to soaring prices, limited inventory, and fierce competition among buyers. Many aspiring homeowners found themselves priced out of the market, while sellers grappled with the dilemma of whether to sell or hold onto their properties in hopes of even greater returns.
As we move into these early months of 2024, many in the industry are sharing their housing market predictions. Will potential buyers get tired of waiting and move forward with buying? Will more affordable, alternative housing options such as condos or townhouses see an increase in interest? Will renting continue to be more affordable than buying? Staying informed about market trends is crucial to thrive in the 2024.
Housing market predictions for 2024
Of course, it is impossible to predict what will happen in the future, especially in the ever-evolving housing industry. On top of that, it is an election year, so the uncertainty can cause a slowdown in the housing market.
We can, however, look at some very important data and past market trends to hypothesize our best guesses. Our expert team has sifted through the data and offered their insights and housing market predictions for the remainder of 2024. Here, we look at three trends and provide recommendations for builders to succeed in the coming year.
The evolution of the monthly housing/rent payment
2023, of course, saw 30-year mortgage rates hit 8% - the highest since 2000. Because of this, buyers are focused more on monthly payment than a home's actual price. And, with rent being cheaper than home buying, 2023 saw many potential buyers turn to renting.
We expect to see rates around 6.5%-7.5% throughout 2024. While this is a slight relief, we know that many home buyers will still be weary of purchasing a home and will opt for the cheaper renting option. There are a few things that new home builders can do to make purchasing more affordable for these weary buyers.
Recommendations: Builders should price aggressively and offer strong incentives. Partnering with a preferred lender can help maximize affordability for buyers, and offering strong incentives, like interest rate buydowns, can get them in the door. Keep in mind that the days of offering 90-day incentives are probably over. Because the market is changing so much so quickly, builders should put a weekly focus on assessing their promotions and make changes as needed.
Existing home inventory
Home inventory remains low, largely thanks to those high interest rates. Homeowners are holding onto homes longer because they are locked in at lower interest rates. Therefore, the existing home inventory is low, with only 1M in December 2023.
This year, expect to see a little bit of a rebound, as some buyers will get antsy and need to sell. With not much relief expected in the market, those owners will not want to wait another few years. That said, new home construction is the key to getting more housing available for buyers. We saw a huge increase in 2023, with new home construction’s share of the market up to 30% when it has historically been around 10%.
Recommendations: Builders should prepare to maximize the increase of demand during the spring selling season. This, of course, includes being cautious with planning. Regular competition studies can help builders understand their buyers and the landscape. While the land market remains competitive, builders should ensure they can locate, assess, and purchase projects that fit the intersection of their strategy and the needs of their area.
Spec homes can help builders reach their goals
As buyers want and need to move, they will want to do so fast. Spec homes are a great way to get inventory into the market and control your costs. Builders can choose the land, colors, finishes, etc, and the decision-making is out of consumers’ hands. Decreasing build times is key so buyers can get into their new home quickly, and they will turn to builders who can accommodate this need.
Recommendations: Plan out spec homes and train your sales agents to focus on creating an exceptional customer experience. The best-trained teams in the world will outperform in challenging markets, and this is a way to do so.
Additionally, we recommend building and maintaining good relationships with your vendors. Labor costs continue to be high because of a lack of resources. Building good relationships with these vendors is essential, so they want to work with you and will continue to work with you.
Download 2024 State of Housing Report: Home Builder Edition today
For more insights on our housing market predictions, download our 2024 State of Housing Report: Home Builder Edition today. This thorough report provides insights and data about consumer demand and builder supply trends that will help you strategically plan out your 2024.
