Rising rates, price cuts, and slow home sales fuel fears of a market crash.
Is the real estate market going to collapse in 2024? It’s been a month since my last interest and market update, and there’s a startling difference between then and now. I’ll give you the details of what’s going on.
Interest rates are rising. Last month, with the Fed rate cut and a slow decline in mortgage rates, it looked like real estate was on the upswing. Now, mortgage rates have increased, and we are fearing a spike in inflation. If rates go up by just 1%, it will reduce buyers’ purchasing power by 10%, making houses more expensive and causing a slowdown in home purchases.
Home prices are dropping. Home prices have dropped since June of this year, especially in Orange and Chatham counties. For example, prices in Chapel Hill are down 17%, and in Carrboro, 23%. Durham had the lowest drop at 3%.
“For buyers to return to the market, interest rates need to be in that 5% range.”
Longer days on the market and slow home sales. Other signs also point to a slowdown in the market: closed sales are down, and homes are sitting on the market much longer. In some areas, days on the market are twice as long as the average.
Increasing inventory. In 2022, we had an all-time low with less than a month of inventory. Today, we are at or above three months of supply. While this is still low compared to the 12 months of inventory we saw in 2009, it’s clear that inventory is trending up.
Is the housing market going to crash in 2024? We have to get past the presidential election and the next two Fed interest rate drops to tell what will happen in the market. Interest rates need to be in that 5% range for buyers to get back into the market. If rates stay high, sellers need to lower their prices to attract more buyers.
Today’s housing market is complicated. To succeed, you need expert guidance more than ever. If you have any questions about the housing market and the right buying or selling strategy, please do not hesitate to contact me at (919) 759-6359 or [email protected].