As we kick off the 2024 New Year in Lake Tahoe, inventory levels are still low and home values are holding steady. Mortgage rates rose to above 7% in early fall of 2023 and have just begun to come down into the 6.6% range.
Many buyers of Lake Tahoe’s luxury homes purchase with all cash. As interest rates move downward, we are seeing more home buyers get off of the fence and move back into the market
While most of 2023, real estate sales were sluggish, the market did pick up slightly at the close of 2023. We currently have only a three-month supply of available listing inventory, which is a factor that continues to hold home values steady.
Will Interest Rates Come Down?
NAR Chief Economist Lawrence Yun joined other leading housing analysts at NAR’s virtual Real Estate Forecast Summit to discuss 2024 sales projections. Many experts forecasted that better days are ahead for the real estate market.
During the last several FED meetings, they did not raise their rate, which drove stock market activity into an extended bull run. While some forecasters believe the FED may reduce rates in 2024, most believe interest rates will not go below 6.3%. As more buyers grew more comfortable with interest rates in the 6% range, loan originations ticked up in the first part of January 2024.
NAR predicts the 30-year fixed-rate mortgage to average 6.3% in 2024, while realtor.com® projects the 30-year fixed-rate to hover around 6.5%. This should improve housing affordability and entice more home buyers to return to the market, Yun says.
Affordability is Growing
NAR’s data shows that rates near 6.6% enable the average American family to afford a median-priced home ($387,000) without devoting more than 30% of their income to housing, the threshold commonly used to measure affordability.
Projections for existing-home sales by NAR forecast home sales to rise 13.5% in 2024. They forecast a rise in new-home sales to increase another 19% by the end of 2024. During 2023, new-home sales were already up 5%.
Chen Zhao, who leads the economics team at Redfin believes home sales will increase in 2024. “However,” she qualifies, “we are not expecting sales to increase dramatically, as rates are likely to remain above 6 percent.”
Low Inventory Still a Challenge
As of November 2023, the number of existing homes on the market for sale as was at 1.13 million units, similar to November 2022, with 1.12 million units. Across the US, inventory levels are locked at about a 3.5-month supply, well below the 6-month supply required to balance market. The lack of inventory has kept the market slightly in the seller’s favor.
We are seeing more negotiable sellers and buyers are no longer operating in a highly competitive market. Because of a more negotiable market, many buyers who are locking in a loan in the mid 6% range are saving money on the purchase price.
If interest rates were to fall below 6%, we would likely see another highly competitive market, which would drive home values higher.
Ultimately, there are more buyers than available homes for sale, but December pending sales rose 8.3%,, which bodes well for the market. The next FED meeting will be at the end of January. We do not expect them to raise their rate. However, it is unlikely that they will begin cutting the rate until inflation falls to their 2% target, which has happened yet.
Contact me today for more information about available luxury properties for sale at Lake Tahoe.
