What to Expect from the 2024 Real Estate Market

I don’t own a crystal ball – but how fun would that be? – and even if I somehow found one at a mysterious crystal ball shop in Encino, it’d do me no good. Almost all predictions about the real estate market were shattered with the pandemic. The truth is, if you’re looking for a very brief summary of what I’m about to say, here it is: Nobody knows. 

The market right now is unpredictable. Economists in 2021 and 2022 made projects and predictions and a whole lot of them turned out to be wrong. 

However, as always, there’s a silver lining to this story, because based on my boots-on-the-ground observations coupled with decades of serving clients through every kind of market imaginable, I can share my thoughts on where things are probably headed, and it’s never a bad thing to prepare!

There are so many factors involved with the trajectory of the 2024 real estate market, including the economy, the political landscape and the Federal Reserve. On the topic of the Fed and lowering interest rates, here’s some perspective from Natalie Benshaw, Prosperity Home Mortgage Consultant and our Berkshire Hathaway HomeServices California Properties in-house lender: 

“The Fed is taking a wait and see approach to future rate moves.  However, they did notify us that, if the economy continues its current path, they do project THREE rate CUTS in 2024! … As long as we don’t see job numbers heat up or inflation creeps higher, things are pointing to rates easing throughout 2024!”

Yesterday, we saw conforming rates coming down below 7% (staying in the 6% range would be amazing or getting jumbo loans into the 6% range would be just as good) but don’t think this means we’ll be in the 3% or 4% range any time soon. Also of note, for homes in Los Angeles County, the conforming loan limit in 2024 is $1,149,825. For Ventura County, the conforming loan limit in 2024 is $954,500. Anything above this limit is considered a jumbo loan, and has always been at a higher interest rate. 

People are under the misconception that the minute the Fed does something, interest rates immediately follow. However, it’s not true. The response can sometimes take weeks to filter down to the lender, interest rate level. This current drop in rates is in response to information that was anticipated weeks ago. Still, it all contributes to strong evidence that we’re in a downward trajectory for rates.

What’s interesting is that even now, with higher rates than in 2021 and 2022, we’re seeing healthy market activity in many sectors, and I expect that will continue through 2024. Homes under $2 million that are well-priced and/or in good condition are getting multiple offers. With lower rates we’ll have more buyers back to looking for homes in this price range. 

In the ultra-high-end market (about $15+ million), special, unique new construction homes are selling. Just down the street from me, DJ Zedd purchased a home for $18.4 million, a record high for an Encino sale this year. Then just two weeks later, a home about six blocks away sold for $20 million off market, shattering the record for highest-priced 2023 home sale in Encino. Both sales were very rare and both sales prove that if you have a unique, new construction home in that ultra-high-end price range, you can find that needle-in-a-haystack buyer who will pay for luxury and uniqueness. 

If you look at the Westside market, there are more than 100 homes for sale in the $20+ million price range while there are very few properties in the Valley clearing that price hurdle. 

The big takeaway here? The under $2-million and extreme high-end markets are booming – properties from condos to castles are selling at rapid speed. Homes in the middle are sitting a bit longer unless they’re in perfect condition. However, part of the reason these homes are lingering isn’t market conditions; it’s price. They’re still a notch or two overpriced, and sellers are still a little more optimistic than buyers. 

Letting a home sit on the market is a mistake. Some sellers will say: “Well, we don’t want to negotiate against ourselves, so we can’t lower the price.”

My response: “You aren’t negotiating against yourself because no one is coming through the door.” 

On some occasions, the way to get more people to pay attention to your home is to improve the price. If they’re not looking, if they’re not making offers, the price may be too high. When I first started out in real estate, dropping the price by $25k or $50k was a huge deal. Now, for properties over $1.5 million, a minimum of $100k is necessary to even create a blip on the radar. Dropping a price by $20k or $30k isn’t going to make much of a difference, especially when you think about search habits. 

I always advise sellers that a buyer’s number one search criteria is price. People look at price before anything else, and they search by price range. You have to drop the price within those cutoffs to get your home into a different category. A $100k difference can often do that. When you’re over $4 million, it’s about that $500k increment that pushes you into a different search category. If you’re in the price category, your home will be missed. It’s why pricing right from the start is so critical. In my 30+ years of real estate, I’ve never heard of one person looking for a house for a certain price who found one for a lot less. About 99% of the time, buyers spend more in every price range. If they’re climbing the price ladder and your home is sitting overpriced at the top of the ladder, they’re likely going to find something else as they ascend. 

And you’ll know right away if your price isn’t right. Within two or three weeks, if you’re not getting any showings, activity or potential offers, it’s too high. Sellers don’t need to completely remodel a property to get a home sold; if the house is in decent condition and it’s not selling, it’s often a factor of price. 

Correct the price, expect a boost of activity. This applies to all cities, all types of homes, all locations and all market conditions . In real estate, we used to say “location, location, location” but a home can be in the best or worst location; pricing is still paramount.

So, pricing right will continue to be a big priority in 2024 and inventory will almost certainly go up. How much inventory will rise is yet to be determined but sellers always put their houses on the market after the beginning of the year once the holiday hangover is gone and buyers are ready to look once again. Sometimes, sellers will take their home off the market during the holidays then re-list in the new year. Typically, I advise sellers not to remove their house from the market. Between mid-December and the first week of January, our market experiences the lowest inventory point of the year. I’ve sold homes on Christmas, New Years … if buyers are looking, let your home shine.  

Should interest rates go down and inventory rises slightly, expect more activity in the marketplace during the first quarter of next year. When interest rates go down, the stock market goes up and it gives buyers confidence to stop teetering on the edge and jump back into the market with conviction. 

Even today, with rates a bit lower than they’ve been, we’re seeing buyers return to properties they’ve previously looked at or negotiated on. That little dip in interest rates provides more consumer confidence and if trends continue, by next summer buyers could be enjoying appreciably lower interest rates – not like they were, but lower. 

Does this mean if you’re looking for a house you should hold off on the search? I don’t think so. By the time rates go down, inventory goes up and you have more buyers involved in the market. It’s never a good idea to wait. If you find a good house, go for it. Like I said, I don’t have a crystal ball, so it’s hard to say what’s around the next corner. However, I can say that the corner of 2023 and 2024 is looking incredibly bright.

Disclaimer to my good friends in real estate: Feel free to share this market update with your clients! I welcome your referrals and I’m happy to chat with you any time. 

Andrew Manning • REALTOR® • Berkshire Hathaway HomeServices California Properties • DRE: 00941825 • 818-380-2147 • andrew@andrewmanning.com