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The housing market is flashing a handful of bullish signals for the year ahead, according to Compass CEO Robert Reffkin.
The founder of one of the nation's top real estate brokerages said he believed the housing market will be on the path to recovery in 2024.
That comes after a rough year for the residential real estate market, with buyers and sellers being held back in 2023 by high borrowing costs and one of the most unaffordable housing climates ever. According to the National Association of Realtors, just 4.1 million homes sold last year, reflecting the slowest pace of sales seen since the year 1995.
But conditions are starting to perk up, real estate economists say, particularly as mortgage rates dial back and set the stage for more sales activity in 2024. The average 30-year fixed mortgage rate cooled to 6.6% last week, according to Freddie Mac data – the lowest home borrowing costs have been in about eight months.
"This year, all the signs are pointing in the right direction," Reffkin said in an interview Monday with CNBC, pointing to three signs the frozen US housing market could be starting to thaw.
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Home inventory is finally starting to tick up after a stagnant 2023. Total housing inventory stood at 1 million units in December, up 4.2% from last year, according to NAR data.
The housing market was slammed by a scarcity of inventory last year, as high mortgage rates discouraged many homeowners from listing their properties for sale to avoid having to finance a new home purchase at a higher rate.
But more owners appear to be moving out of necessity or have warmed up to the idea of selling as mortgage rates head lower. 59% of homeowners are currently locked into a mortgage under 4%, down from 72% of homeowners in that situation last year, Reffkin said.
"More inventory equals more sales," he added.
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Sellers who are in the market are also slashing prices on their homes in a bid to entice buyers. 39% of all homes on the market had a price drop in the fall, Reffkin said.
"Sellers are more realistic of pricing than they were last fall," he added.
More sellers are also offering concessions to entice buyers, like cash for repairs or mortgage rate buydowns. In the three months leading up to October, 35% of home sales included some type of concession, according to Redfin data.
Home-buying conditions are bound to get more affordable as the inventory shortage improves and home sales pick up.
Redfin is predicting that home prices will slip 1% this year, after rising 3% in 2023.
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Prospective home buyers are also diving back into the market as they get used to elevated mortgage rates and the sticker shock of higher costs wears off. Mortgage applications rose 22% in December from the prior year, according to the Mortgage Bankers Association.
At this rate, buyers are outpacing sellers in the market, Reffkin said, noting that Compass's real estate agents are seeing more business in the new year.
"The most common quote I've heard is, "This is the busiest January I've had on record, and more buyers are calling me over the holiday season than ever before.' They were working over Christmas. They were working over New Year's," he said. "I think buyers are trying to beat people to the punch before the spring market really hits."
Experts have generally grown more positive on the outlook for residential real estate into 2024 — but the market probably isn't returning to the ultra-low pandemic era mortgage environment anytime soon.
Mortgage rates under 3% are likely a thing of a past, real estate mogul Barbara Corcoran said, recently making the case that buyers shouldn't wait for conditions to change or improve to enter the market.
