By Holly Henbest, Realtor
While 2023 will be known as a year of low inventory, high interest rates, and low volume of transactions, there were a lot of things to cheer about for 2023 as we ring in 2024!
We started off in 2023 with a surge of buyer activity as interest rates did a short-term drop to between the high 5%’s and mid 6%’s. This surge was short-lived as we then saw interest rates start to climb and buyer activity dwindle, as buyer affordability was impacted.
While many speculated that we’d see prices drop, we instead saw home prices remain stable and in most Arizona neighborhoods we saw increases. We then saw interest rates start to fall a bit in the fourth quarter of 2023, which gave real estate a little push. While that didn’t impact our demand as much as we would have liked, the timing of the holidays is also a factor in slowing demand during the fourth quarter.
New construction homes were a shining star in 2023, as builders offered mortgage rate buy-downs and provided buyers with homes that needed little after purchase investment, other than landscaping and window coverings. The ability for a buyer to know that they wouldn’t need to replace or upgrade anything after their closing date made new construction homes an attractive option as most buyers were more budget conscious.
As we start the new year, there is again much speculation that interest rates will continue to decline, with March being a commonly forecasted timeframe for a more (hopefully) significant decrease. My personal prediction is that if we start to see rates in the 6% range, we’ll likely have a surge of buyers who will also take advantage of buy-down strategies to further decrease their interest rate to a more manageable level for their budget.
We all wish we had a crystal ball to truly forecast what will happen, but I expect that we have a tremendous amount of pent-up demand. Buying a home is an investment, but its main purpose is shelter and shelter needs change as life circumstances change. Family dynamics change (e.g.., marriage, divorce, babies, kids heading to college, retirement, and relocation), regardless of interest rates. During 2023, many people wanted to move to support their lifestyle changes, but instead put their plans on hold. I expect that this year many people will choose to proceed with their life plans. That pent-up demand will also bring us new listings, so it’s hard to say how the balance may shift between a buyer’s and seller’s market, but my personal prediction is that we’ll continue to see much of the same, but with a higher level of volume.
There don’t seem to be any indicators of supply significantly outweighing demand in the short term, but rather a situation of just more volume and more movement is likely.
Every year I write an article like this. Here are a few quotes from my article last year that turned out to be spot on:
“We will likely continue to see a hypersensitive reaction to rates, so if they stabilize or reduce, buyers will remain confident. However, if we continue to see signs of inflation and increased mortgages rates, we’ll likely see a softening of buyer confidence.”
“A seller’s market may be coming soon to a neighborhood near you.”
“We didn’t see any seasonality patterns during the pandemic, but 2023 will be our first full post-pandemic year, and therefore it will be interesting to see if seasonality returns to its regular pattern.”
We hope you enjoyed a wonderful holiday season. If you are wanting to celebrate the 2024 holiday season in a new home, we hope you’ll reach out to us! It’s never too soon to start to discuss a plan to support your real estate investment and lifestyle goals.
Holly has been a Desert Ridge resident since 2000 and has been a Realtor since 2006. She is the leader of The Henbest Team with Realty One Group. Holly is ranked in the top ½ of 1 percent of Realtors in Arizona and is a certified luxury marketing expert. She has been ranked #24 in the Top 50 Realtors by the “Phoenix Business Journal” for the past several years and recognized by “So Scottsdale!” magazine as a Real Estate Superstar for 2019, 2020 and 2021. She’s also been the #1 ranked realtor at Realty One Group/North Scottsdale for the past several years. Learn more at henbest.com.