Synopsis
“We are currently stuck in a place where home prices can’t rise much because of rates and affordability, and prices can’t drop much because of a lack of inventory!”
Where we have been
Looking back to 2023, the market (Inventory, # of sales, etc.) hit bottom in January 2023. Since then, we’ve been playing catch-up. More homes went on the market in the later part of the year, but down 12.4% overall. Despite the rates, home prices did appreciate 1.4%, but this was lowest price growth seen since 2011.
Where we are now
It’s been a healthy start to 2024 with more listings and Pendings than a year ago, and homes are selling 4 days faster. Currently in Hennepin County, we have about 2 homes for every 1 buyer (2 months of inventory). This tells us that buyers are out there and also we are still in a seller’s market. Anecdotally, I am already seeing signs of a spring market with some fast sales and some listings going straight to Pending (ie. buyers skipping inspections). An important note is Mortgage applications are up over 10%!
Where we are headed
It’s 100% going to come down to interest rates. Rate cuts by the feds are expected this year, but we’ve seen delays with the January numbers on consumer spending (up) and unemployment (down). 71% of American homeowners currently have a mortgage rate under 4%. Those of us in the industry say we need rates to get within 2% of their current rate to get people moving…(ie. 5-6%). If you are curiously watching from the side-lines, just wait and see the frenzy that will ensue if and when we get into the 5%. It’ll be a crazy ride!