Strong Economy Bolsters Real Estate Market Going Into 2024

Last week I wrote an article with an early look at how the Santa Clara County real estate market was doing in January 2024 vs. January 2023. To put it mildly, the numbers looked great; the year certainly has started off with a bang.

This is not just a local phenomenon. It looks as though the real estate market nationwide is set to have a much better year in 2024 than last year. To understand the factors which are underpinning the apparent strength of the market, please keep reading.

Hard monthly data for national-market listing and sales activity in January will not become available until late February, but preliminary indicators and anecdotal reports from the field strongly suggest that with the dramatic improvements since October in interest rates, financial markets, and consumer confidence, both buyers and sellers are re-engaging to a much greater degree than in late 2023. (Extreme weather, however, reduced the rebound in some regions, presumably just temporarily.)

The extent to which prospective sellers – many of whom held back from selling over the past 18 months – decide to list their homes will be particularly important to the supply and demand dynamics which underpin the market. December data, while useful for context, was generally not yet significantly affected by the recent changes in economic indicators. While waiting for clarity on January’s numbers, let’s review the latest economic and market data available.

“Given the recent stabilization in [mortgage interest] rates, potential homebuyers with affordability concerns have jumped off the fence back into the market. Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace.” FHLMC (Freddie Mac), 1/25/24

“Over the last two months, [consumer] sentiment has climbed a cumulative 29%, the largest two-month increase since 1991…For the second straight month, all five index components rose… there was a broad consensus of improved sentiment across age, income, education, and geography.” University of Michigan, Consumer Sentiment Index, Preliminary January Report, 1/19/24

“Pending home sales surged in December 2023, with month-over-month and year-over-year transaction gains…NAR forecasts a 13% increase in existing-home sales…in 2024.” National Association of Realtors, Seasonally Adjusted Pending Sales Index, 1/26/24

“The U.S. economy notched another month of mild inflation…[Per the Fed’s preferred inflation index] Using 3-month and 6-month annualized rates, core inflation was 1.5% and 1.9% respectively in December. ‘It really is amazing that these 3- and 6-month rates are below 2%’ said Charles Evan, former President of the Chicago Fed.” Wall Street Journal, 1/26/24, “Cooler Inflation Keeps Door Open for Rate Cuts This Year”

“The recession America was expecting never showed up. Many economists spent early 2023 predicting a painful downturn…Instead, the economy grew 3.1% last year, up from less than 1% in 2022, and faster than the average for the 5 years leading up to the pandemic. Inflation has retreated substantially. Unemployment remains at historic lows, and consumers continue to spend…” The New York Times, 1/26/24, “Economists Predicted a Recession. So Far They’ve Been Wrong.”

Of course, if there’s anything the pandemic taught us, it’s that life can be unpredictable. While the economic indicators are (mostly) flashing green across the board, we know this can change at any time, and faster than we might expect.

If you are thinking of selling any time in 2024, there’s no time like the present to get the wheels in motion. Please don’t hesitate to contact me, and I’ll help you make your next move the best one yet.