2024: Good Vibes on the Home Sales Market Horizon
If humankind has learned anything - it's to expect the unexpected. You can study, infer and predict all you want, but there's a 50/50 chance it'll be different tomorrow - or in a few days, weeks or months.
Such is the case with the homes sales market.
It's all Relative
Although high by today’s standards, mortgate interest rates are on their way back down to June 2023 levels - and well below the recent 23-year October peak of 7.9%. Current interest rates on 30-year mortgages continue to weaken recently from 7.07% to 6.83% (first week of January 2024), according to the Mortgage Bankers Association. This has homeowners excited, because they've come to love the low(er) interest rates we've experienced in recent years. It's an affordability thing.
In addition, the relatively low inventory of used homes has jazzed up homeowners' - and home builders' - spirits (and sales). The National Association of Realtors reported just 1.13 million existing homes for sale in November 2023, versus a 1.79 million sale average over the five years preceding the pandemic. And, according to the Commerce Department, an annualized 1.15 million single family homes were started in November, well above the 969,000 in October. That’s the most since April 2022…and good news for the Biden administration.
There's always a flip side to the coin. This good news for homeowners and builders is not so great for millennials and other first time buyers.
2023's Pessimism
Cautious investors like me entered 2023 expecting stocks to be negatively impacted by higher interest rates, to see declining (but still high) inflation, and to fear the possbility of a recession.
However, because of rapidly growing interest in artificial intelligence, positive news about inflation, and the Federal Reserve suggesting three rates cuts in 2024, the Nasdaq added 43+%, the S&P soared over 24% and the Dow notched multiple new records, jumping almost 14%. All three ended the year with strong vibes.
That long anticipated recession keeps evading us, suggesting that potential home buyers not yet in the market might be anxious to join the race in early 2024. Shades, perhaps, of the mid-90s with AI pushing productivity this time.
Based on my questionable 2023 predictive powers, I’m glad I’m a “dare to be average,” buy-and-hold fellow. It sure makes a difference when you’re wrong in forecasting the market. Timing the market is a losing game - you gotta be there all the time.
2024's Optimism
Fewer folks fear that 2024 holds the possibility of a recession, a feeling that has added spunk to the S&P 500 Index, which was up more than 24% by year-end 2023.
This is a bit too euphoric for my comfort level. I continue to fret about the so-called “magnificent seven”giant technology companies, including Microsoft, Amazon, Apple, Alphabet, Meta, Nvidia, and Tesla. They have a huge impact on the stock index, and this undue influence on most of the market’s gains makes all of us more vulnerable to downturns. Look back on 2023’s early 19% tanking and study which companies were responsible for most of it.
Money market funds have fattened to more than $6 trillion (yep, that's "illion" with a “tr”) - a pile of cash that could add buoyance of its own to the 2024 stock market should those safe yields taper off a bit. If the Fed does in fact rachet down short rates .75% to 1.50% in 2024 – reducing mortgage rates similarly (to 6% or lower) – that possibility alone could incentivize the aforementioned new homebuying urge even more. It could also encourage more current homeowners to sell for a variety of reasons, as rates in the 6% range move closer to those older, lower rates.
Higher rates…8%, 7%, 6%...take some getting used to, but it can happen when one is spurred by a desire to scratch the upwardly mobile itch and/or to search for more space for a growing family. Also, some are forced to abandon their current low mortgage rate when promoted to a better job in a new location.
Food for Thought
Overall, things seem to be moving in a positive direction for those seeking a first or larger home. As with most things, patience is required to let the trends gather momentum.
But remember: Big homes and fancy cars aren't necessarily signs of success. It’s the invisible signs of saving and investing that really matter!