Will things be better for home buyers next year? I know a lot of people who think so or at least hope so. The National Association of Realtors (NAR) reported recently that at least 20% of home buyers are waiting for interest rates or home prices to drop.
Let’s address home prices in the Niceville area. The median sales price in August 2023 was $458,000, 3.51% higher than $442,450 from August 2022. The average sales price in August 2023 was $561,681, 10.19% higher than $509,725 from August 2022. The average sales price per square foot is a more normalized indicator for the direction of property value. The sales price per square foot in August 2023 was $256, 4.92% higher than $244 from August 2022. As you can see, home prices continue to climb.
Why are sellers able to continue to ask for higher prices when interest rates are over 7%? The answer is inventory. Niceville currently sits at less than 1 1/2 months of inventory. It takes about 6 months of inventory to be a neutral market. Niceville hasn’t been in a neutral market since precovid. NAR reported that nationwide for July 2023, we had the fewest number of existing homes for sale going back to 1982! July is typically a month when you have a lot of homes for sale.
So, will interest rates get better? Morningstar economists are predicting rates will fall to 5% by the end of 2024 and 4% the year after. As soon as rates drop to these levels, those who have been “waiting out the market” are going to begin actively looking for homes and making offers. Lower interest rates will cause a lot of people to compete for the same house. These lower rates allow buyers to qualify for more, which means they can afford to put in higher bids for the home they want, thus driving up home prices even more.
Predictions for 2024:
Inventory is expected to remain tight, “demand will probably exceed supply similar to current conditions,” and “supply is likely to remain below what we would deem a balanced market,” says Chen Zao, Economic Lead at RedFin. These factors could lead to a sharp increase in home prices. In fact, an AEI housing market indicator report revealed they believe homes are expected to appreciate 7% in 2024.
A 7% increase in home prices is hugh! I mentioned the median home price in Aug 2023 was $458,000. A 7% increase would mean that same house would sell for $490,060. That’s a $32,060 price increase! If I were looking to buy, I would try to negotiate for the seller to help pay down my interest for the next 2 years and then I would refinance. If you haven’t heard it before, the saying goes “Marry the house, date the rate“.
Curious how Niceville compares to other cities? You can compare on some of the key factors here.
Will things be better for home buyers next year? The predictions are not really.