5 Burning Questions About the Future of the Housing Industry
As 2023 draws to a close, astute builders, buyers, and investors are contemplating the probable landscape of the housing market in the upcoming year. Vincent Barbato, Co-Principal of Family Development and an industry veteran of nearly four decades, recently shared his distinctive insights for 2024 by addressing five crucial questions:
Will housing sales decline?
"I don't believe so. With the higher interest rates slowly being accepted as the new norm, the reality is that if someone wants a new or different home and he or she can afford it, they should buy it. Prices are now stabilized and although interest rates are higher than in the past 20 years, a prudent homeowner can always refinance later when rates go down.
With 2024 being a presidential election year, the political race might cause some potential buyers to hesitate as they wait to see who will be elected, yet the incumbent administration will strive to fortify the market and encourage confidence in the economic trajectory which will encourage others not to wait. Therefore, these two forces probably will balance each other out and sales will remain steady throughout the year.”
Will inventory increase?
"I don't foresee a substantial rise in inventory.
In prior downturns, a large decrease in demand was always accompanied by a strong surge in supply which created a significant imbalance in the market. Something always had to give to disrupt the imbalance and prices usually crashed into a downward spiral until a balance between supply and demand was re-established a few years later.
For possibly the first time in history, this did not occur with this downturn. It is very true that the higher interest rates have significantly curbed demand by lowering the number of available buyers, but the supply of available homes has remained remarkably low. New homes did not flood into the market because labor shortages and Covid-related supply constraints during the prior boom years, stopped builders from over-building. In addition, current homeowners are keen on retaining their historically low interest rates, so they certainly have not flooded the market with their homes.
I believe that in 2024, due to lender caution, builders will still be kept at bay from over-building and the majority of today’s homeowners will still be less inclined to move away from their low interest payments. Of course, there will still be the “natural” demand which should stay pretty much in balance with the supply of homes that “naturally” come on the market. We might witness an increase in activity toward the end of the year following the election depending on who wins."
Will prices decline?
"My projection is that prices should remain pretty stable throughout 2024. Interestingly, given the abnormal factors I just noted, most markets are in balance. When this is the case, prices normally stay about the same or even increase some with inflation. If interest rates continue to go up significantly, it will have a negative effect on pricing, but most experts believe that interest rates have plateaued. With it being an election year, I think prices will remain stable.”
Will it be a buyer's or seller's market?
"When there's a balanced ratio of supply with demand, it’s known as a “normal” market where neither buyers nor sellers hold a significant advantage. The markets that we are building in are all normal. As far as I am concerned, normal is good for everyone.”
One bold prediction for 2024:
“If you are looking to move to an area that many are trying to leave, you might find a “buyers’” market exists. Conversely, if you are looking to move into an area that is attracting lots of other people as well, you are likely to find more of a Sellers’ market. As an example, with a 4-6 month supply of inventory, the Coachella Valley housing market is poised to be quite healthy. From my perspective, it appears that supply will actually trail demand in this market, so if you are someone interested in moving to the Palm Springs area, you should not wait. This holds true for most popular cities.
Some people thrive on the “deal,” but, to me, that term has lots of different meanings. It should not be just about price or your interest rate; ultimately, it should be about your quality of life. If you find a home that in your view provides you and your family with the quality of life that you are looking for and you have the ability to buy or lease it, make it happen. That is my hope for everyone in the coming year."
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