No doubt about it, the real estate market has been wonky for the past two years.
In this new year, I want to come forth with some pretty positive things about the housing market.
The housing market in our area usually just almost stops from Thanksgiving through to New Year's Day. We have had an extremely slow 2023, with the housing market in our exact area down 27% from 2022, which was already down precipitously from the heights of 2021.
During this holiday time, buyers get very discouraged because there is almost nothing new that comes on the market, so what is on the market generally are the dregs of the fall market that for whatever reason have not captured the imaginations of the current crop of buyers. So, when the first new houses pop up in the spring, there can be a bit of a feeding frenzy.
This is true every year, but I have a feeling in 2024 it will be especially so. Interest rates have been the cause of the most recent downturn in the market - Buyers simply don't have the buying power they did even a year ago, let alone two years ago. Add to this, that the vast majority of sellers refinanced when interest rates were at, or almost at their lowest, and you have a very topsy-turvy housing market, where sellers, who are in a rush to sell, have become particularly reluctant when there is no way they can buy again in their current neighborhood without paying huge property taxes on a new home, unless they qualify to move their tax basis, along with a very high cost mortgage.
Well, mortgage interest should be coming down in the new year. This might make it a little less onerous for sellers to sell. And buyers to buy! In 2023, we had the lowest amount of turnover on existing home sales in decades. So there was literally nothing to sell anyone. I would constantly pick up the phone, with an agent calling me to check what I had coming up because they were desperate to find something for their buyers! If inventory increases, then prices will not go higher, but at least movement will occur in the market, which is always good for everyone.
I think enough time has gone by that sellers understand that the market has changed and that they are not likely to get the same high prices their neighbors did 24 months ago. This is also going to be good for the market, as many sales that should have happened didn't because sellers did not agree with the price buyers thought their properties were worth. Whenever you are in a transitional time, where there is a huge disconnect on value between buyers and sellers, you end up with a very stagnant and challenging market, which is what has been occurring over the past 6 months.
Most first-time buyers are relatively young, with 35 being the median age in our area. Most single-family home sellers are 60+. So if there is not a clear path to downsizing, or leaving the area altogether, a seller is not going to sell. Recently passed Prop 19, has helped older sellers, who can now move their tax base anywhere in California. And like it or not, the fact that with Prop 19 the tax base on inherited properties will rise to market value, will have the beneficiaries of such properties putting them on the market, rather than holding on to them, will also be good for inventory and prices.
Surprisingly, in our area, 38% of homes that change hands are mortgage-free. So that is a ton of equity that has built up over the years and sellers will try to move to a place where they can pay cash. So, if the flow of people out of the area increases, that movement will be instrumental in a resurgence of cash flow into the communities, and new, fresh eyes, bringing input and vitality to all kinds of neighborhoods.