As we embrace 2024, it's crucial to reflect on the tumultuous journey of the real estate market in the past year and anticipate future trends. 2023 was a year of significant changes, marked by a peak in interest rates over 8%. However, the year closed with hopeful news from Federal Reserve Chairman Jerome Powell about potential interest rate cuts, sparking renewed activity in the real estate sector.
The Shift in Mortgage Rates
The latter part of 2023 witnessed a substantial drop in mortgage rates, approximately 1.5%, rejuvenating the market. This reduction in rates led to an increase in mortgage applications, indicating a revived interest among potential buyers who had previously been deterred by higher rates.
Market Dynamics and Inventory Challenges
Santa Clara County's real estate scene experienced a rapid rebound in median sales prices, defying expectations. This surge can be attributed to the low supply but also a rallying stock market, influencing the purchasing power in regions like Silicon Valley. The year also saw an increase in competitive bidding, leading to properties selling significantly over their asking prices.
Looking Ahead: 2024
The anticipated rate cuts in 2024 are expected to empower buyers, enhancing their purchasing power in the market. However, the supply may struggle to keep up with the rising demand, leading to continued price increases, especially in the early part of 2024.
The Balancing Act: Supply and Demand
While a rise in sellers is expected as interest rates become more favorable, the current low inventory levels and high buyer demand suggest that any new listings will be rapidly absorbed. This dynamic hints at a shift towards a more historically normal appreciation rate in the real estate market.