Happy New Year! What if I told you that the very factors that scared off many real estate buyers in 2023 are now paving the way for unprecedented opportunities in 2024? It's true. As we begin this new year, join me in exploring how last year's challenges have morphed into this year's golden opportunities for homebuyers.
The year has started off strong in our real estate market, with good news in so many ways. If you held off on making your move in 2023, here are my top reasons why if you wait, you’ll be too late. Starting with stabilizing mortgage rates, we’re seeing in real time how tipping the scales back towards a balanced market unleashes pent-up demand, and how that small trickle of hope turns into a river of activity. Join me on this look at market forces in action.
Some of the terms I use here are industry jargon. To learn more about what any of these mean, please check out my glossary of terms here.
Though most of last year, the historic mortgage rate increases enacted by the Federal Reserve from March 2022 – July 2023 factored heavily in many decisions to hold off on real estate. By the fall, however, we were already starting to see buyers and sellers returning to the market. Prices kept going up across most of our county, and the first wave of rejuvenated activity benefitted those who were well prepared to take advantage of the shifting market conditions.
Q1 - Winter 2023
Looking back at January - March, Chester County had the highest average MSI we saw in 2023, though it was still very low at 2.03. Mortgage rates were still increasing, and news headlines warned of falling housing prices we never saw. All the while, the political machine captured much of the news cycle’s attention.
When it comes to industry prognostication for 2023, most analysts predicted a decrease in housing prices. The most dire of those predictions foresaw a drop in housing prices as steep as -22%. A few sources, including Realtor.com, Homes.LLC, CoreLogic, and NAR, predicted price increases of up to 5.4%.
There was good news, even then. Here in Chester County, the median sale price was fully 1.86% above the previous year’s first quarter. This trend of rising housing prices would continue through the year and seems set to continue in 2024 as well.
Q2 - Spring 2023
The news cycle moved on, and pent-up demand for housing started leaking through the cracks. This led to the second quarter of 2023 seeing its seasonally expected increase in activity, all while the number of homes on the market increased notably. Compared to the first quarter’s MSI, the spring season’s MSI of 1.7 shows an uptick in buyer activity. Remember: the lower the MSI, the more competition there is for buyers and the more negotiating strength there is for sellers.
That activity saw even higher median sale prices, up 8.58% compared to Q1. Those early predictions of prices falling by as much as 22% across the country were looking less and less helpful. And the market was about to face another, positive shock to its system.
Q3 - Summer 2023
As the summer rolled in, we found a shift in market conditions as the FED ended its policy of increasing mortgage rates. Though rates were at their highest, the summer market exploded with a flurry of activity. The MSI dropped to 1.3, available inventory was at its highest all year, and once again the most desirable homes were selling like hotcakes. Though this was the first season in 2023 where the mortgage rates were stabilized, the final rate increase was on July 26, 2023, and we’re still seeing confidence in market conditions return.
Those sellers and buyers who acted quickly once market conditions turned saw the highest median sale prices of the year, fully 11.40% higher than in the winter season. This first wave of rejuvenated market activity has come and gone by now, as more and more people are realizing the opportunity that is present.
Q4 - Fall 2023
The fall market held many of the hallmarks of any year, though also reminded us that trends don’t always hold true. The MSI did increase, a little, up to 1.6. Available inventory also shrank relative to the quarter before, though there were more homes on the market at the end of fall than at the end of winter.
Most of these market changes follow historic trends. In our area, the end of October signals when much of the region swings into full holiday gear. Until after The Big Game in February, people tend to have less time available to focus on real estate. In years past, I would even joke about how the real estate market takes a vacation during this season, though that certainly isn’t the case this year.
When we look at sale prices, we can see why so many people were motivated to keep up with their real estate dreams this past fall season. Median sale prices were fully +7.36% higher than when the year began. Those early predictions of between -22% and +5% price shifts didn’t pan out in our area. Yet, as we’ve seen, their impact on consumer confidence was strong enough to dampen the winter market last year.
2024 So Far
The new year has brought with it a flurry of activity. In only 11 days, there are 136 new listings in Chester County. Even with football season still capturing many weekends and The Big Game still looming on the horizon, the real estate market is coming to life.
If this year follows any historic trends, then we can expect even more activity as the year progresses. Does the market go back towards 6 day listings and a single showing before making an offer, or does the market move towards a balanced MSI and home sales at a pace that allows for consideration and negotiation? I am not a prognosticator, so will continue looking at the data each day to find out.
This year has been a textbook example of a market that ignores the headlines. Had the doom-and-gloom predictions of tanking housing prices come to fruition, we wouldn’t have seen a 7.36% increase in housing prices from Q1 to Q4. Nor would buyers and sellers have been ready to make their moves once the FED stopped increasing mortgage rates. So, those people who focused on the data for their own neck of the woods prospered. The national headlines and big predictions sell articles, but local data is all that matters when it comes to your home.
Thank you for joining me on this retrospective! I am excited to see what 2024 brings us, what predictions are made, and how real-life people continue to be more impactful than media headlines. If you’re ready to make your move, give me a call and we can get you on the path.