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Four Factors To Know: Buying A Home In 2024

Four Factors To Know: Buying A Home In 2024

January 16th 2024

For most of 2023, homebuyers faced a daunting real estate market marked by relatively high mortgage rates. Combined with steep home prices and a shortage of homes for sale, it’s no wonder many struggled or gave up their home search entirely.

But with this new year comes new hope: Could homebuyers get a break?

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If you’re gearing up to buy a house soon, it’s time to forget the horror stories of last year and reset your expectations. Below are the old rules that no longer apply to the current real estate market—plus the new ones that will take their place this year.

1. Old rule: Mortgage rates are so high, buying a house might not make sense
New rule: Rates are ebbing, so they shouldn’t stop buyers

In late 2023, mortgage interest rates hit highs around 8%, but they started falling to the mid-6% range by mid-December. While rates are anticipated to creep up due to recent higher-than-expected inflation reports, most real estate experts say they won’t approach the highs seen last year.

The® forecast for 2024 projects that mortgage rates will end the year in the mid-6% range. That’s not all that low, but it’s low enough to make a difference to homebuyers.  The graph below shows rate changes over the past 4 months.  On January 16th at the time of writing this article, the average 30 year rate is 6.446%.  

Homes are going to fly off the market again, as there is pent-up demand while buyers hibernated during the skyrocketing mortgage rates.  Now that rates have come down, buyers are coming back and are eager to buy.

Of course, some potential buyers might still be holding out. They’re hoping rates will drop even further—perhaps back to COVID-19 pandemic levels in the mid-2% range.

However, waiting to buy is likely unwise. Today’s buyers need to get comfortable with the “new normal” interest rates.

While rates may improve slightly, anyone waiting for rates in the 2% range again is liable to miss the boat entirely and miss out on a large amount of equity in the process.

2. Old rule: Buyers won’t face much competition
New rule: Competition for homes will be fierce

In 2023, home shoppers who were willing to get out there despite high rates were rewarded with less competition in the marketplace. This won’t be the case going into 2024.  If rates continue to drop, as anticipated, competition will become significant.  Already, we're seeing a definite uptick in properties selling quickly here in Cape May County. 

In Cape May County, sold prices year-to-date have increased on average by 10% for single family homes and 4% for condo/townhomes (Jan-Nov 2022 vs Jan-Nov 20223).

National experts have made their projections for home prices over the next 5 years, in The Home Price Expectation Survey (HPES) from Pulsenomics.  It's a great resource to show what experts forecast for home prices over a five-year period. It includes projections from over 100 economists, investment strategists, and housing market analysts. And the results from the latest quarterly release show home prices are expected to go up every year through 2027 (see graph below): 

3. Old rule: Sellers won’t bend much to buyer demands
New rule: Some sellers will make concessions

With so few homes on the market, we’re technically still in a seller’s market. In past years, this meant that sellers didn’t need to negotiate much with buyers. But with more new listings entering the market in 2024, it isn’t as favorable for sellers now. This means there’s going to be some wiggle room for buyers.

Like a more typical market, we have recently seen sellers offering a variety of concessions that can help bring buyers to the closing table. They’re much more inclined to pay some buyer closing costs, negotiate fees, or perhaps pay points for a buyer’s lower interest rate.

4. Old rule: Buyers must make their best and highest offer to get attention from sellers
New rule: Any reasonable offer could do the trick

Since the number of homes on the market has been so constrained, many sellers got used to the idea of receiving multiple offers, often above the asking price. Desperate buyers were often forced to play along.

Those days are more or less gone now in all but the most competitive markets. With more fresh listings, buyers should still aim to make a reasonable offer. Even if there are multiple bids, there are other homes available to choose from. 

In Cape May County, the most recent stats show that properties are selling for an average of 97% of list price, year to date (Jan-November 2023). This means you should aim to make an offer in that ballpark, generally speaking.  Your agent will help you come up with the best price, but ultimately you have the final say, of course.  December's data will be released at the end of January but we don't expect it will deviate from the high 90s.  

5. Old rule: If you like a house, submit an official offer ASAP
New rule: Make a ‘soft offer’ to see what kind of deal you can get

Back in the pandemic market, things moved quickly. Buyers had to get their offers in pronto if they wanted to stand a chance. This desperate pace has since slowed somewhat.

Now?  Buyers have a little more time to come up with a bid that feels comfortable.  However: keep in mind that you may need to act quickly if you are targeting a popular listing.  We are still seeing well-priced properties go under contract within just a few days, here at the Jersey Cape.  

A “soft offer” can be a good place to start.  As your buyer agent, I can go to the seller’s agent and float an offer below the asking price to see what the seller might say.  You’re not in writing, you’re not committing to the offer price, but you’re now able to test the waters before you get it on paper.  It opens up conversation, and then the real estate professionals are able to gather more information that can potentially help the buyer get a great deal. Where, before, in a tight market where a property doesn’t last very long, a seller’s willingness to negotiate is relatively low.

6. Old rule: Buy to flip and make quick money
New rule: Long-term investments make the most sense

In recent years, plenty of real estate investors made a fortune flipping properties. They would buy a home cheap, fix it up, and sell it for a big profit. But times are tough for flippers today.  The truth is, "flips" with major equity-gain potential in Cape May County are uncommon now, with the majority of that type of opportunity existing in the off-shore markets of Cape May Court House, the Villas, North Cape May, etc.  

As a result, a buy-and-hold philosophy might be a better bet for 2024, and beyond.  The old idea of flipping a home in six months for a major profit is not going to apply in this market or the markets of the next few years (where prices are expected to continue increasing with continued supply challenges).

If you’re going to buy, focus on it being a long-term investment. Today’s buyers would do well to buy a home they can stay in for at least five years.  The days of being able to flip a home in six months for a major profit are gone, generally speaking.  

Bottom Line: Put my 26 years experience to work for you!  I've sold hundreds of homes in Cape May County, with hundreds of happy clients.  I've helped my clients achieve their real estate goals in every kind of market.  I'd love to do the same for you, reach out today to buy or sell!

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