2023 Year in Review | Conejo Valley

 

The market “experts” had a poor showing in 2023. The forecasts called for the U.S. economy to enter a recession (it didn’t), mortgage rates were expected to drop (rates went up), home prices were supposed to come down 9% (prices increased), and the number of home sales were forecast to drop about 8% (sales plunged over 20%).

 

With rates going up, home owners decided to hold on to their property rather than give up their low rate. As a result, inventory hit record low numbers locally, and even with buyer demand much lower than years past, few homes for sale kept home prices stable. In fact, multiple offers remained common in spite of the higher mortgage rates.  

 

Finally in December, mortgage rates started to reverse course and come down – a trend that’s expected to continue in 2024.

 

What to Expect in 2024

“For home buyers who are taking on a mortgage to purchase a home and have been wary of the autumn rise in mortgage rates, the market is turning more favorable, and there should be optimism entering 2024 for a better market.”

– The National Association of Realtors

 

The Good News for Home Buyers

 

Competition isn’t what it was

The expectation of selling in a weekend with multiple offers above asking price are behind us for now. However, multiple offers are still common. But rather than competing against 10 buyers, you may only be competing with 1 or 2. But if the home has been on the market for a while, sellers are more negotiable.  

 

My Advice: Lowball offers are still unlikely to get accepted, but if the house has been on the market over a couple weeks, sellers begin to get nervous and accept that their house is likely overpriced. So if you’re willing to risk losing the house to another buyer, sit tight for a couple weeks and you will probably get a lower offer accepted.   

 

Mortgage rates are coming down and expected to continue down in 2024

After peaking at 7.79% in October 2023, mortgage rates ended the year at 6.61%, right about where we started off (rates were 6.48% in Jan 2023)

The overwhelming consensus is for rates to come down in 2024 with the California Association of Realtors (C.A.R.) forecasting rates to drop to 6%. Yes, they thought the same thing last year, but there’s much more data to support the 2024 forecast. First, rates have already come off their highs, inflation has slowed considerably, and many believe the Fed will cut rates several times this year. Also, rates almost always come down in an election year.

 

My Advice: Waiting for interest rates to come down is a logical strategy, however, as rates come down and buyers come back, you may end up actually paying more for the house due to increased competition. Conversely, if you buy now, you’ll likely face less competition and pay a little less. Yes, you’ll pay a higher rate today, but you’ll get a lower price and the ability to refinance down the road.

 

Prices are still going up and should continue up

We’re already seeing the impact of lower rates on home prices. When rates dropped in December 2023, home prices shot up 20% ending the year at $1.1 mil. But that’s still about 200k below the peak of $1.315 mil back in May 2022.

The official CA forecast is for home prices to increase 6.2%, however the Conejo Valley typically outperforms the state – don’t be surprised if we see double digit price increases this year.

 

My Advice: Real estate is a long term investment. Timing any market is more luck than skill. You should be looking at a 3-5 year window minimally. The long term forecast for real estate is very positive. Real estate benefits those who buy and hold.  

 

While housing is traditionally one of the first sectors to slow in a shifting economy, it’s also one of the first to rebound.

 

Inventory of homes should improve, but it’s still a seller’s market

Many potential home buyers got priced out once mortgage rates increased. Or they got spooked by the change in the market and took a wait-and-see approach, expecting (or hoping) home prices would plummet. Today’s buyers won’t be facing anywhere near the competition as years past, but historically low inventory will continue to be a major issue for the foreseeable future.

 

My Advice: Our low inventory issue is here to stay. I believe this is a short term window of opportunity for buyers. As rates settle down, more buyers will come back to the market. The days of competing against 10+ offers is likely behind us for now, but competing against a few offers again is already happening. 

 

Sellers are more willing to make concessions again

During the boom, buyers were offering anything they could think of to make their offer stand out – no repair requests, free “seller rent back”, waiving contingencies like appraisal and loan, plus many others. Those days are gone for now which is great news for buyers.

 

My Advice: Sellers will typically fix broken and safety items. Don’t be afraid to ask.

 

There are still great loan options available to buyers

Start the loan process early. The biggest barrier to buying a home is financing. But sellers want to sell and banks want to lend. Many new loan programs have come online that make the rate more acceptable for buyers.  

 

My Advice: Start the pre-approval process early. It doesn’t cost you anything and you need a pre-approval to have your offer considered. There’s nothing worse than seeing the perfect home hit the market and not being prepared to make an offer.

 

The Not So Good News

 

Inventory is still historically low

In my opinion, this is the biggest challenge we face in 2024. The Conejo Valley has been built out for decades and demand has only increased. Low inventory will continue to be a major factor in 2024 as homeowners don’t want to sell and give up their low interest rate unless they have to (meaning a job transfer, divorce/financial reasons, or death). But a drop in rates will also help free up some inventory. The more rates come down, the more homeowners will be willing to give up their low rate and put their home on the market. That will lead to more homes selling in 2024.

 

My Advice: If you find a gem in a neighborhood you love, don’t wait. You may not see another one for months or even years.

 

Prices probably aren’t coming down

After the housing crash of 2008, many buyers believe that a changing market means lower prices, distressed sellers (aka short sales/foreclosures), and lots of homes on the market to choose from. That’s not the case this time. Homeowners have lots of equity and prices are expected to continue up as rates come down. The Conejo Valley has only gained in popularity since the pandemic and we’re not building any new houses. Reasonably high demand and low inventory will keep prices stable going forward. 

 

My Advice: If you’re planning on staying in your next house for at least the next 3-5 years, the forecasts are very much in your favor. Think long term. 

 

The days of sub 4% mortgage rates are likely gone for now

Record low interest rates that we had for a couple of years was a historical anomaly, not a typical interest rate environment. Mortgage rates in the 5-6% range are likely to remain for a while. To give some perspective, consider the following:  

• In the past 50 years, interest rates have been under 3% for just 12 months. 
• Between 3.0% and 3.5% for 16 months.
• And 55 months between 3.5% – 3.99%. 
• That leaves 517 months (43 years) over 4%! 

 

My Advice: Don’t lock in a rate you really can’t afford with the expectation that rates will come back down drastically. Yes, they’re expected to come down, but a 2% drop anytime soon is very unlikely. 

 

Remember: Purchase price is forever, mortgage rates are temporary.

 

Bottom Line…

After a slow 2023, the market is expected to rebound in 2024. Lower rates will not only bring back more buyers, but also convince more sellers that it’s worthwhile selling and giving up their low interest rate.

Mortgage rates are forecast to continue to drop as the year progresses likely bouncing somewhere between low 6% to mid 5%, give or take. Multiple offers for homes in popular neighborhoods never went away, and will only be more common as rates continue down. You’ll need to be prepared.

If you’re on the fence about buying in the short term, early 2024 is the time to jump in before prices begin to surge once mortgage rates ease. You’ll likely end up with a home at a lower price and the ability to refinance at a lower rate once rates drop.

 

Let’s Connect!

 

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