2023 Real Estate Market Recap – Navigating This Year’s Challenges

The past year, characterized as the “bottom-out” by the National Association of REALTORS┬« (NAR), unfolded as a challenging period for the real estate market. Despite optimistic expectations for an economic upturn, the Federal Reserve’s implementation of multiple interest-rate hikes, totaling one percentage point, heightened market pressures. This surge pushed mortgage rates beyond 7.5%, the highest in 23 years, resulting in record-low housing affordability. Potential buyers found themselves requiring incomes exceeding $110,000 to stay within budget, compounded by rising consumer prices forcing Americans to allocate over 30% of their income to home purchases. The lingering challenge extended to first-time buyers grappling with escalating rents. Even with an increase in housing inventory surpassing 1.1 million homes, demand persisted, perpetuating a prolonged housing shortfall. The market witnessed its second consecutive year of slowdown, with existing home sales plummeting below 4 million units. Home prices continued to rise, fueled by a scarcity of available homes, compounded by a historical underbuilding trend and fewer homeowners listing properties due to higher mortgage rates averaging around 7% throughout 2023.

Key Insights from NAR’s Real Estate Forecast Summit

The National Association of REALTORS┬« (NAR) Real Estate Forecast Summit provided crucial insights into the market’s trajectory:

  1. Year-end rate prediction of 6.3%, up from 6.0% a couple of months ago.

2. Unit count bottomed at 18% down in 2023, compared to 2022. Predictions show an upswing of 19% in new construction and 13% in resales.

3. NAR identified the 10 markets with the most pent-up demand.


2024 Real Estate Outlook – Promising Prospects for Homebuyers

After two subdued years, NAR foresees a positive shift in the real estate market in 2024, creating a more favorable landscape for homebuyers. Several key indicators suggest an impending recovery:

  • The Federal Reserve has paused interest rate hikes, providing stability.

  • Although rates remain higher than pre-pandemic levels, the absence of recent increases hints at a potential downward trajectory in the first quarter of 2024.

  • Lower interest rates may lead to reduced mortgage rates, with the peak observed in 2023 showing signs of decline.

  • The decline in mortgage rates is expected to reinvigorate buyer demand, stimulating housing activity.

  • Despite an anticipated growth in single-family construction, the housing supply is projected to remain tight in 2024, contributing to continued home price appreciation.

Top 10 High-Demand Housing Markets for 2024

NAR has identified specific markets poised for robust housing activity in 2024, considering “returning” buyers, home price appreciation, affordable listings, job and income growth, high-earning millennial renters, and a lower violent crime rate. The top 10 markets include:


1. Austin-Round Rock-Georgetown, TX

Noteworthy “returning” buyers and the influx of high-earning Millennial renters contribute to growth. Positive indicators in the local housing market are already evident.

2. Dallas-Fort Worth-Arlington, TX

Rapid job market growth and 22% of renters able to afford the median-priced home indicate increased housing activity as mortgage rates decline in 2024.

3. Dayton-Kettering, OH

Dayton offers affordability and numerous options for first-time buyers, with a strong job market facilitating renters’ transition to homeownership.

4. Durham-Chapel Hill, NC

The Research Triangle leads with the highest share of “returning” buyers, and despite a shortage of affordable listings, substantial wage growth fuels market momentum.

5. Harrisburg-Carlisle, PA

Affordable for over 30% of renters, Harrisburg attracts high-earner renters, and with an anticipated decline in mortgage rates, both inventory and buying activity are set to grow.

6. Houston-The Woodlands-Sugar Land, TX

Houston’s affordability, strong job and wage growth, and a fourfold increase in wages contribute to anticipated market activity in 2024.

7. Nashville-Davidson-Murfreesboro-Franklin, TN

The resurgence of “returning” buyers and a robust job market attract high-earning Millennial renters, but a severe housing shortage poses a challenge.

8. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

Expect a boost in this market with pent-up demand from both buyers and sellers. A notable percentage of homeowners have surpassed the average tenure, providing increased purchase options for first-time buyers.

9. Portland-South Portland, ME

Attracting Millennial renters and boasting a low crime rate, Portland faces challenges with affordable listings for first-time buyers. However, an increase in inventory is expected from homeowners surpassing the average tenure.

10. Washington-Arlington-Alexandria, DC-VA-MD-WV

Despite a high teleworking population, the decline in remote work is expected to drive demand in this area. One in five listings falls within the budget range for first-time buyers.


Final Thought

These markets exhibit strong indicators of pent-up demand, making them noteworthy for real estate professionals in 2024. Increased buyer activity, job market growth, affordability, and demographic shifts underscore the potential for dynamic and lucrative opportunities within these markets throughout the upcoming year. Real estate professionals should closely monitor these regions as they navigate the influx of homebuyers returning to the market in 2024.

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Bill Middleton