Looking Back at 2023 & Looking Ahead to 2024

Looking back there were four major economic events that defined the real estate market in 2023.

1. FLUCTUATING INTEREST RATES: he trajectory of interest rates defined much of 2023’s real estate landscape. Beginning the year around the mid-6% range, mortgage rates fluctuated between 6% and 7.30% in the initial months. However, from mid-May to mid-October, there was a notable surge, peaking at over 8% on October 17. By the year’s end, the average rate for a 30-year fixed loan settled at 6.76%. Forecasts indicate a slight decrease in rates in 2024, offering potential relief to homebuyers.
2. HOME INSURANCE: In response to escalating construction costs and heightened catastrophe risks, insurance giants like State Farm and Allstate ceased writing new home insurance policies, particularly in wildfire-prone regions like California. This scarcity of policies poses hurdles for prospective homebuyers, especially those seeking coverage for properties with wood roofs or in high-risk areas. Forecasts suggest continued challenges in obtaining affordable insurance in 2024, although hopes remain for increased accessibility.
3. STOCK MARKET RALLY: 2023 S&P 500 ended the year with a gain of approximately 24% and the Dow finished the year on a record high, according to CBS News. Decreasing inflation, a strong economy and the anticipated lower interest rates generated confidence for investors, especially in the last quarter of the year. According to CBS News, the benchmark S&P 500 index inched lower on Friday, the last trading day of 2023, but ended the year with a 24.2% gain. The Dow Jones Industrial Average rose more than 13% in 2023, and the Nasdaq soared 43%, driven by gains in big technology companies, including Nvidia, Amazon, and Microsoft. Given the record high stock market closing in 2023, I expect more buyers will enter the market with more readily available funds. This, plus possible lower interest rates in 2024, may increase demand in our area even higher than last year.
4. INITIAL PUBLIC OFFERING MARKET: The IPO market, a traditional driver of high-end real estate sales in the Bay Area, experienced a downturn in 2023, with only four local companies going public compared to the previous year’s seven. However, forecasts indicate a rebound in IPO activity for 2024, which could bolster the upscale real estate market in the region, attracting affluent investors and stimulating property sales.

LOOKING AHEAD

While the broader Bay Area housing market remains somewhat constrained by limited inventory to start 2024, demand for homes remains strong. Mortgage rates had fallen in recent weeks, which brought back some sidelined buyers back to the market and may continue to do so if rates continue to fall. Additionally, a drop in rates may even make refinancing and option for those that purchased last year. Overall, economic conditions in the region should reman on par with 2023, with modest job and income gains across a range of industries. The key tech industry may have stabilized, which should help housing demand in many neighborhoods. For-sale inventory may remain somewhat limited for the foreseeable future. This will continue to constrain sales volume but at the same time potentially lead to increased competition in prime neighborhoods and gains across a range of price points.

IN SUMMARY

Presentation, marketing, and pricing remain the three most important factors in selling a home. These three elements need to be fully optimized in order to receive the highest price and best terms for a property. If you are thinking of buying or selling your home, please feel free to contact me for a confidential consultation. Let my experience, extensive market knowledge, and proven track record work to your advantage.