As we welcome the arrival of 2024, it's only fitting that we take a moment to reflect on the housing market data and significant shifts witnessed in Reno/Sparks in 2023. In the past year, fluctuating interest rates, homebuyer sentiment, and market inventory considerably impacted the affordability, demand, and value of real estate. As we peer into our rear-view mirror, these factors offer valuable insights to guide our expectations and predictions for the year ahead.
What the Housing Market Data for Reno-Sparks Tells Us
Looking forward to 2024, we remain optimistic and confident. The possibility of declining interest rates and an increase in inventory, which would encourage potential buyers who have been on the fence to make the leap, fuels our optimism despite the uncertainties that come with the changing times. Investors with deep pockets, too, are likely to increase their real estate holdings. The only question that remains is the degree to which these factors will impact the market. Will we see a significant uptick in inventory? And how will this, in turn, influence real estate prices over the year?
National Housing Market Data and Trends
Impact of Changing Mortgage Rates
When considering the impact of rising mortgage rates on home sales, it is essential to put the changes of the past two years into perspective. Following the high double-digit rates of the 1970s and 1980s and the drop induced by the dot-com bubble burst in the 1990s, mortgage rates generally ranged between 5% and 3%, occasionally dipping as low as 2% from 2000 to 2020. However, a shift occurred in 2022 and 2023, with interest rates soaring dramatically. In 2023, average rates peaked in the high 7% range, even reaching the low 8% range.
These rates had a significant impact on both hopeful buyers and potential sellers. Affordability was crushed for buyers, and sellers (who likely have a mortgage at an interest rate of less than 5%) hesitated to let go of their homes.
Fortunately, mortgage rates have been declining after reaching a two-decade high in October 2023, bringing some relief to potential homebuyers. In the last month of the previous year alone, rates dropped by approximately one full percentage point. According to Fannie Mae and the Mortgage Bankers Association, mortgage rates will likely decline in 2024. Lower interest rates to start the year could encourage more homeowners to list their properties and more home hunters to begin their search, which is a good sign.
Potential Pent-Up Inventory and Demand
While higher interest rates have had a cooling effect on the housing market, causing frustration among buyers and sellers, patience may be wearing thin as people eagerly await the opportunity to change their living situations.
More and more people aren't counting on interest rates or home prices to go down before decide to buy a home, according to Bank of America’s Homebuyer Insights Report. In April 2023, 85% of potential homebuyers expected home prices and interest rates to fall, and said they were waiting until then to buy. But by September 2023, nearly 40% of would-be homeowners said they wouldn't wait for prices or interest rates to drop before making a purchase.
Additionally, the National Association of Realtors predicts a 13.5% increase in the sale of existing homes next year, with an estimated 4.71 million homes to be sold compared to 4.1 million in 2023. Despite higher interest rates, more Americans continue to name real estate as the best long-term investment.
These three factors combined suggest that the demand for 2024 could still be quite strong, as people are no longer content to sit on the sidelines. The recent decrease in interest rates will provide a helping hand to those who are ready to take the plunge in 2024. With home prices remaining steady, affordability is the only obstacle they may face.
Local Housing Market Data and Trends
Median Sales Price
The median sales price remained robust in December 2023, holding steady at $565,000, with a month-over-month increase of 1.73%. This is an encouraging statistic for December, a month that typically experiences a decline. It suggests a positive outlook for appreciation in 2024.
Homes Sold
In 2023, we witnessed a significant decline in local and national demand. The average number of monthly homes sold was around 350, a hundred less than the average of 450 in 2019. It was undoubtedly an exceptional year in terms of demand.
New Contracts
Looking ahead to 2024, the 289 homes entering into contracts in December indicate that we can expect approximately 250 to 300 homes to be sold in January. Although this may seem relatively low when considering historical data, it is important to consider the seasonality factor, especially if we experience a milder winter compared to the previous year and interest rates remain stable.
New Listings and Active Inventory
The data indicates a decline in new home listings to 200 in December 2023. This decrease is likely to impact pricing. Even a moderate increase in demand and reduced supply can lead to continued appreciation in the overall market for 2024.
In December 2023, 585 homes were available as active inventory. It is common for active inventory to decrease during December, January, and February. However, we anticipate an increase starting in March of this year. If the number of homes reaches around 1,200 to 1,400, it will positively impact affordability and help maintain a cap on appreciation.
If there is a significant increase in local and national inventory, it could act as a hedge against appreciation. However, if inventory levels remain low, we could expect appreciation to continue until 2024, returning us to the high point we reached in spring 2022.
Days to Contract
The number of days to contract indicates a slight market slowdown, suggesting a decrease in activity during December. Specifically, it was 13% lower compared to the previous December.
Closed Price v. Ask Price
On average, most home sellers are closing at 97.9% of their asking price, slightly below the overall average of 98.5%. This indicates that while most sellers achieve their desired price, there is a small margin for negotiation and potential room for improvement in the selling process.
Applying 2023 Housing Market Data to 2024
The previous year presented a distinct landscape for buyers and sellers in the Reno/Sparks real estate market, and the upcoming year holds great promise. Shifts in market dynamics, influenced by potential declines in interest rates and an increase in inventory, may create a favorable opportunity for buyers patiently waiting and sellers contemplating listing their properties.
As always, Dickson Realty remains committed to providing data-driven insights, guidance, and support to navigate the ever-evolving real estate market. Here's to a new year filled with optimism, opportunity, and growth!
