Featuring the perspectives of real estate executives:
Jenni Bonura, President and CEO, Harry Norman REALTORS in Atlanta
Sophia DePallo, Realtor and Team Leader, Retsy Real Estate in Scottsdale, Arizona
Mike Golden, Co-CEO, @properties in Chicago and Christie’s International Real Estate
Seth Kaufman, Chief Sales Officer, ONE Sotheby’s International Realty in South Florida
Anthony Lamacchia, CEO, Lamacchia Companies Inc. in New England and Florida
Catherine Lee, President, Douglas Elliman Texas
Rob McGarty, Founder and Broker, Bushwick Real Estate Services in Seattle
What do you expect for the overall housing market for 2024? Up, down or stable? Why?
Jenni Bonura: The past few years have been marked by a notably tight inventory in the housing market. Transitioning into late 2023, we’ve seen a general uptick in inventory levels, although it’s important to note that some areas still face limitations. Looking ahead to 2024, the expectation is for the market to achieve a more balanced state and in some price points, where we may see a shift from a seller’s to a buyer’s market.
Alongside this, we should also prepare for the return of traditional seasonal market patterns. Interest rates, a pivotal factor, will undoubtedly continue to shape the market; with increases potentially dampening purchasing power and decreases likely to stimulate buyer interest and activity.
Anthony Lamacchia: I expect more of the same, a very similar year to 2023, but the first couple of months will be even slower than the horribly slow first couple of months than 2022. Reason being, we are going into 2024 with less inventory than we did in 2023, which is mind-blowing to think about.
Mike Golden: Similar to 2023, 2024 will be a challenging year, highly dependent on interest rates and inventory. If rates come down, we could see more inventory, but demand will increase too, which would put upward pressure on prices. That’s not necessarily a bad thing, as the Chicago market remains relatively affordable compared to other major U.S. cities. Election years tend to cause a bit of a market slowdown, too, so that’s something to watch in the second half. The transfer tax is another potential destabilizer in the city if it’s voted in. Similar to Los Angeles, Chicago could see a surge in luxury listings as sellers try to avoid the tax, followed by a pronounced drop in activity once it goes into effect.
Catherine Lee: Because many homeowners have mortgages with interest rates under 4%, many have a hard time justifying a move. I think transaction volume will improve in 2024 when interest rates hopefully begin to stabilize.
Sophia DePallo: My short answer is: Up, but challenging. With the recent news that the Fed will hold off on interest rate hikes, I am expecting rates to continue to trend in the opposite direction we saw for 2023. As the rate of inflation stabilizes and continues to decline, I expect that interest rates will also continue to decline.
For this reason, I am expecting a positive start to 2024 for many buyers, especially those who are waiting for slightly more palatable interest rates. However, limited inventory presents a challenge, and I predict this may create a tighter market.
Do you think any segments of the residential market will see growth in 2024? (new construction, rural, luxury, etc.)
Seth Kaufman: New developments, as buyers have the option to extend their deposit timeline and more favorable rates may become available over the next 12-24 months. Luxury homebuyers are also increasingly looking for properties that are completely move-in ready, and South Florida has a Rolodex of luxury developments in the pipeline, many already under construction.
Rob McGarty: I think we will see growth in both quantity and prices of new construction because buyer demand will increase as rates come down. I expect rural markets to continue to decline as demand for second homes wanes because the short-term rental market remains oversaturated and discretionary spending is reigned in. Value luxury as defined by some luxurious features like waterfront, acreage, prestigious location will remain brisk as there will be plenty of tech money flowing in town. Opulent luxury will slow down, and we’ll likely see price compression in that segment.
Lamacchia: Well, when you talk about growth, it’s confusing to people because they confuse total sales with average prices. I don’t even think we will see average prices going up in 2024. In fact, I think we will see them settle down a bit in certain segments of the market. As far as sales go, as I said, I think it will be the same.
Golden: New construction should remain strong due to low resale inventory and homebuilders’ ability to offer some mortgage rate relief with buydowns. I think we could see an uptick in downtown condo sales given, where rents are vs. the great values to be found in the market. If the new transfer tax passes, we could also see some city buyers — especially in that first luxury tranche — opting for the suburbs instead, creating growth in those markets.
Lee: I believe new construction will see increased growth because many resale homes are locked in at low interest rates for a long time. Developers have the ability to offer incentives, such as rate buy downs, that make new construction very competitive with resale homes.
Bonura: Consistency remains a hallmark of the real estate market cycle: homes that stand out in desirability, condition and pricing will invariably command top market prices and sell quickly. This applies across the board — to new construction, luxury homes, condominiums and more. As we see inventory expand, buyers will benefit from a wider selection of options. It’s important to acknowledge, however, that new construction may continue to face challenges such as labor shortages, rising material costs and expensive capital. Despite these hurdles, an increase in the supply of new homes is anticipated.
What will be the biggest challenges for agents in 2024? How can they overcome these challenges?
Lamacchia: I believe the challenges in 2024 will be the same as 2023. There are just not enough homesellers wanting to sell their homes because they do not want to give up their interest rates. The only way agents can overcome this is work harder to find sellers that want/have to sell. Those dealing with death/divorce/estate sale situations or move ups that absolutely have to move. Agents also have to be more accepting of the fact that they have to work with more buyers. Some agents are getting frustrated and confused, and we don’t need more buyers, we don’t need more sellers. They waste all kinds of time focusing on sellers and neglecting buyers. That’s a big mistake.
McGarty: The biggest challenges for agents this year will be agents who haven’t adapted from the fast-food mentality of the COVID market to our current fine-dining market, where every detail matters. The agents who are actually closing deals are working harder than ever to help their buyers and sellers, not posting on social media.
Golden: I like to look at challenges as opportunities. The market is going to go up, and it’s going to go down. This is why in robust times as well as slower times, it’s critical to communicate your value. This is especially true given the recent broker commission lawsuits. Make a business plan, communicate your value, keep your skill set sharp, always be prospecting and, especially, stay positive.
DePallo: If we continue to experience our current rate of low inventory, this will result in fewer transactions for a great number of real estate professionals. It will be even more important for agents to remain experts in local inventory and market conditions. Educating clients, both buyers and sellers, is all the more critical to successful transactions.
Bonura: As we anticipate the market’s shift from a seller’s to a more balanced or buyer’s market in 2024, agents will help educate clients about the impact of these changes on property values. Precision in pricing becomes more crucial than ever as we guide clients through this transition. Additionally, effective marketing across various channels will be crucial for selling homes. Agents who can market well, use technology effectively and show deep market knowledge and expertise while delivering a first-class service experience will do well, especially when the market is changing.
Experienced and informed agents who understand pricing and negotiation will add more value for their clients. They can also mitigate problems during the buying or selling process with their strong business relationships and networks, leading to a smoother and more efficient experience for everyone involved.
Kaufman: The class-action commission lawsuits against NAR and certain brokerages is going to change the way business is done, and those agents who are fully prepared, knowledgeable and supported by a first-class organization will not only overcome these changes but thrive.
What do you think needs to happen for the market to improve?
Golden: [Co-CEO] Thad Wong and I have been asked this question a lot lately, and the truth is, no one really knows. We counsel our agents not to focus on the question of how or when the market will improve. Instead, focus on your business — the agents who focus on improving themselves in challenging markets will reap outsized rewards when the market improves. If you’re an agent, use this time to improve client service, communication and prospecting and networking, and increase your knowledge and skills.
DePallo: To accommodate the healthy bank of buyers waiting for better overall market conditions allowing them to realize the goal of homeownership, our inventory needs to grow significantly, and it would be wonderful to see interest rates in the fives. Anything lower would have to accompany greater economic challenges, and we want everyone to win in 2024.
McGarty: It depends how you define “improve.” Improve as increased prices, increased volume, increased affordability? Either way, it’s a simple supply and demand problem. We’re short on supply, and demand is and always has been strong.
Lee: In order for transaction volume to grow, I think that either interest rates need to decrease or home costs need to come down to account for the increased rates.
Kaufman: There is a sense of uncertainty in the real estate industry right now given the historically high interest rates, fluctuations in the stock market and instability around the globe. We are fortunate for continued demand and stability in our market (South Florida) compared to others across the country. The road to a more secure real estate environment hinges on more palatable interest rates, achieving stability in the markets and a clear trajectory toward resolving the ongoing conflicts around the world.
Bonura: There is certainly a correlation between low mortgage rates and increased sales. However, we have seen that homes do sell across a wide range of mortgage rates, both when the rates are in the low single digits as well as the double digits. The challenge is when mortgage rates are constantly changing. The market thrives on stability, and frequent rate changes can lead to uncertainty, prompting buyers to delay their decisions or attempt to time their purchases. For the market to improve, a stable rate environment is essential. Lower mortgage rates would propel this even further, as lower rates tend to stimulate more activity in the housing market.
Lamacchia: The No. 1 thing that has to happen is interest rates need to come back down to earth. They are nearly three times what they were two years ago. It’s too much of an increase too fast. I believe they will start to cut down but not in any large way until we get into 2025 and 2026.