A Look Back at the Real Estate Market in 2023 … And A Look Ahead at 2024

Feb 27, 2024 | Industry Trends

By Lauren Houlik, Director of Market Intelligence, and Rob Love, President/CEO

Throughout 2023 our team monitored the real estate market primarily to answer the question, “Can our prospects sell their homes at a reasonable value?” Perhaps surprising to some given the continuing high interest and mortgage rates, the answer throughout the year was a resounding “Yes!” In fact, home resale values ended the year at an all-time high, with the National Association of Realtors® reporting that 56% of homes that sold in December were on the market for less than a month.

In this update to our ongoing series, we first take a look back at all of 2023, then share some projections on what to expect in 2024. If you’d like to refer back to any of our earlier recaps, please see the in-depth analysis of six key performance indicators we originally published in February of 2023, or explore the periodic updates we gave in April, June, September and December.

Median Home Resale Values

This is, in many ways, the most important barometer for senior living. If our prospects are able to sell their homes for a good price, then they will be able to pay the entrance fee and move to our communities.

The table below shows the median home resale values for the past five years, with 2023 data shown in dark green.

Existing Single-Family Home Median Sales Price: 2019-2023 chart.

During the first half of the year, home resale values were either consistent with or slightly less than 2022 values (the red line). From July on, though, 2023 resale values remained higher than 2022, finishing the year 4% higher. From a senior living prospect’s perspective, they can sell their home now for as much or more than they ever could.

Months’ Supply of Homes

The next question prospects want to know is “How long will it take to sell my home?” There is good news there as well, as there was only a 3.1-month supply of homes for sale in December. What does this mean? In an August 18 Bankrate article by Jeff Ostrowski, he wrote, “The real estate rule of thumb says that a balanced market—one that favors neither buyers nor sellers—is characterized by five to six months of supply.” That means that, relative to historic trends, the low level of homes for sale continues to put pressure on buyers to make a quick decision, which helps support higher prices.

Month's Supply of Existing Single-Family Homes chart.

Annual Rate of Sales

Why are homes still selling quickly—and for top dollar—despite higher mortgage rates? There simply continues to be a relatively low number of houses for sale, so demand for the few houses on the market is high, thus sustaining prices. In other words, it continues to be a sellers’ market, not a buyers’ one.

The table below demonstrates this market by showing the annualized number of home sales each month. In December of 2023, the country was on a pace for about 3.4 million existing homes to be sold over the course of a year, which was just slightly more than half of the rate from the 5.9-million-homes pace at the end of 2020 and the beginning of 2021.

Number of Existing Single-Family Home Sales: 2019-2023 chart.

Are These Trends Consistent By Region?

All four regions tracked by the National Association of Realtors® are experiencing these same trends, although they do differ with strength of the trends.

The graph below shows the year-to-year changes in the number of homes sold and the median sales price by region. As you’ll see, all four regions are showing decreases in the number of homes sold; however, the decrease is far more pronounced in the Northeast and Midwest than it is in the South and West. Similarly, home resale values have increased more in the Northeast and Midwest than they have in the South and West.

Difference in Sales Pace & Sales Price by Region: 2022-2023 chart.

So What Is Happening With Interest Rates?

The graph below shows the federal funds rate (the red line), the national average rate for a 30-year mortgage (the blue line), and the median home resale price (the yellow shaded area).

Starting in 2022, the Fed increased the federal funds rate from 0% in January to 4.25% by year end, and the mortgage market experienced a similar, though somewhat smaller increase from about 3.4% in January to about 6.4% by the end of 2022. In 2023, the Fed continued to increase the federal funds rate, but in smaller increments, finally holding steady at 5.25% from July on. Interestingly, the average mortgage rate held fairly steady through the first half of 2023 before increasing more than 1% after the federal funds rate leveled off.

Even with the Fed continuing to hold interest rates steady at the beginning of 2024, the mortgage interest rate has been falling for the past several months, decreasing from a high of about 7.6% in October to about 6.6% in January.

Fed Interest Rate, Mortgage Rate & Median Sales Price: 2021-2023 chart.

2023 Summary

2023 was a good year for senior living prospects to sell their homes and move to communities, while it continued to be a not-so-good time for most others to buy homes. Although mortgage rates are beginning to drop, they continue to limit the supply of homes coming on the market as potential sellers have lower mortgage rates on their current homes and would have trouble affording to “buy up” (or even downsize) given today’s higher rates. Many people are choosing to stay where they are until rates drop.

What Does 2024 Hold?

It will be interesting to see where the home resale market goes in 2024. We’ve come a long way since January 2023, when the consumer price index increased at an annualized rate of 6.4%. In January of 2024, it was only 3.1%. Still, inflation continues to run “hotter” than the Fed’s target rate of 2%, and inflation has stayed relatively steady since October when it was 3.2%. So it remains to be seen when the Fed may begin to cut the federal funds rate and mortgage rates may start to drop.

As you can imagine, projections for inflation in 2024 range widely, with some expecting we will hit the Fed’s 2% target this year, while others project inflation from 2.5% to 2.8%. The Fed itself is projecting hitting 2.4% in 2024 and 2.2% in 2025 before finally reaching its 2% target in 2026. Like many things, only time will tell.

As for mortgage interest rates, the National Association of Realtors® expects they will average 6.8% in the first quarter of 2024 and drop to 6.6% in the second quarter, according to its latest Quarterly U.S. Economic Forecast. The trade association predicts that rates will continue to fall to 6.1% by the end of the year.

Although a substantial drop in inflation and mortgage rates is not expected, it is encouraging that most sources project we will continue to move in a positive direction. If so, lower mortgage rates could loosen up the housing market a bit, bringing a greater supply of homes for sale.

What would somewhat lower mortgage rates and an increased supply of homes mean for our prospects? It’s hard to say for sure. A decrease in mortgage rates from 6.8% to 6.1% may not be enough to bring a large number of homes back on the market. If not, then the limited supply of homes for sale should continue to support relatively strong resale prices. So perhaps 2024 is the best time for our prospects to sell, as greater supply in future years could begin to make it more of a buyers’ market, bringing values down. Again, only time will tell.

In 2024, Love & Company will continue to track these trends on a quarterly basis and report our findings to the senior living field. Stay tuned for our next update in early May, which will recap first quarter results that are reported in late April.

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