Louisville, like the nation, continues to see rising single-family home prices amid low inventory.
Rising interest rates in 2023 sidelined many potential homebuyers and provided little appetite to potential home sellers sitting on much lower interest rates.
Median home prices rose 3.6% last year in the greater Louisville area over 2022, according to the Greater Louisville Association of Realtors. New listings were down 10% and closed sales were down 15%.
“Brutal,” Mike Frank, a senior mortgage broker at Homestretch Mortgage in Louisville, said of 2023. “That was my worst year in the business last year. That’s because everybody was scared because the market turned so fast and rates were at 8%.”
it was likely done raising interest rates after more than a year of hikes meant to slow inflation. It also signaled three rate cuts could be coming in 2024.
Lowering this rate is expected to lead to lower mortgage rates, which hit a 23-year high in October 2023 at nearly 7.8%.
the typical down payment for first-time (8%) and repeat (19%) buyers, according to the National Association of Realtors), a 30-year mortgage with a 7% interest rate would mean monthly payments of about $1,600 (not including homeowner’s insurance or property taxes). Drop the interest rate to 6% and the payment falls to about $1,440.
“It going to get people off of the fence,” Frank said of potential home buyers. “I don’t think (the rates) are gonna go too much lower, but at least it’s gonna get people to go, ‘Ok, maybe this is the time.'”
More homes should hit the market and be sold. But will it balance the market?
Last year marked the worst year on record for home sales in the United States since 1995, according to the National Association of Realtors.
In the greater Louisville area, December 2023 marked the 24th consecutive month of year-over-year declines in existing home sales. Real estate agents compare months year-over-year instead of month-to-month because of seasonal trends in real estate.
Redfin. Nearly 60% have a rate below 4%.
“How do you convince those people that this is a great time to move?” he said.
He anticipates the more rates drop toward the rates that homeowners currently have, the more likely they’ll be to take the rising equity they have in their home and go shopping for a new one.
“If we can close the gap that we have between rates that homeowners got a few years ago versus current market rates, that could help push a few more homes into the market,” he said.
2024 will still be a seller’s market
An imbalance of buyers and available homes has made for a persistent seller’s market, a trend local real estate agents don’t see changing any time soon.
Those in the real estate industry consider three to six months of supply (how long it would take for the existing supply of homes on the market to sell at the current sales pace) to be a “balanced” market favorable to both buyers and sellers.
traced back to the Great Recession when many homebuilders went out of business and those that remained didn’t resume building at previous rates.
Even with a projected drop in interest rates, DeWalt said she’s not anticipating the frenzy of the 2020 and 2021 housing market that saw intense bidding wars and the waiving of contingencies, such as home inspections.
“I don’t see it being as crazy like that this coming year, even with more buyers coming on because of the interest rates,” she said. “They’re not gonna drop that low.”
national Realtors association, in a recent news release. “If price increases continue at the current pace, the country could accelerate into haves and have-nots.”
What does this mean for the real estate market in 2024?
Schuler said he anticipates 2024 will “be a more normal year of what real estate used to be like pre-pandemic,” with its most challenging aspect being expectation management for both buyers and sellers.
“From a home seller standpoint, they’ll need to understand … their property will not sell within three hours,” he said. “All they’ve heard for the past three to four years and all they’ve seen on social media and then the news are homes selling for above asking price, multiple offers, waiving any and every contingency. Whereas now that’s not the case.”
Buyers, meanwhile, may feel buoyed by news of interest rates dropping, but they’re still up against a challenging inventory issue.
“From a home buyer standpoint, they’re still gonna have to understand the fact that inventory levels continue to be historically low,” he said. “So if you have your list of everything you want and need in a home, you’re going to have to be understanding that you probably won’t get all of those items, and chances are you still will be paying 98% of the listing price.”
Even if rates fall, Schuler and Frank encouraged prospective home buyers to analyze their budget and focus on what a potential monthly payment would be.
“We instruct our clients that you live in your payment,” he said. “So try not to just focus so much on the price of the home or the rate. Let’s just look at the monthly payment. Can you comfortably live with this monthly payment? Yes or no?”
Different loan programs have varying parameters that will shape a monthly payment, Frank said, yet another consideration for people as they weigh entering the market.
“We would be naive to think that the rate doesn’t matter because it does,” Frank said. “But there are other factors that really come into play.”
Growth & development reporter Matthew Glowicki can be reached at [email protected], 502-582-4000 or on Twitter @mattglo.
Source: courier-journal.com