Last month was our annual gathering of the Keller Williams family. Our convention is called Family Reunion and this year it was in Las Vegas at the Mandalay Bay convention center. I always enjoy attending the annual conference because I get to see so many of my friends that I’ve made over the years, but more importantly, the amount of information that we learn and absorb is second to none. There were over 200 breakout sessions at this year’s conference, and you could learn anything and everything about real estate. Every time I attend, I come back home feeling like I am a better, more informed and educated agent ready to serve my clients.
As he’s done in past years, Gary Keller presented the state of real estate in one of the general sessions. The slide deck that Keller Williams provides to all their associates of that presentation is chock-full of fantastic information. And if you’re a stats and numbers geek like me, you absolutely love it. This year there were 178 slides, and I can’t possibly share them all with you, but what I will do here is share some of the important ones and a little commentary around each.
2023 was not a banner year for home sales across the U.S. As you can see, it was the lowest number of sales since 2007, but more importantly, it was the lowest number of sales in the last 35 years. A combination of homeowners not willing to sell and leave their 3% mortgage and buyers not willing to pay 7.5% for a mortgage were the primary reasons there were so few transactions.
This was the biggest learning curve we had to help educate buyers on in 2023. Few people understood why the number of transactions were down 20, 30 or 40%, while home prices continued to go up. The answer was simply inventory. Inventory was at an all-time low and that drove up home values. The inventory problem will continue for the foreseeable future.
You can see from this slide that the projection for home prices in 2024 across the U.S. is an expected increase by 2.2%. But remember, all real estate is local so depending on where you are buying that number could be up or down. If you’re buying in a resort area like here in Hawai`i. I would expect that number to be higher than 2.2%
Mortgage rates in 2023, hovered around 6.81% on average. Most economists don’t believe mortgage rates will get below 6% in 2024. I tend to agree based on the economics I see in regard to inflation and unemployment.
Unemployment has remained consistent over the last two years. Depending on what the Fed does with the future interest rates unemployment may tick up in 2024. If it does tick up in 2024, then it’s more than likely the Fed will make more interest rate cuts than predicted. That will trickle down to better mortgage rates.
As you can see from this graph, and from what you’ve read in the headlines, inflation continues to be persistently in the mid 3% range. The Fed was hoping it would be below 3% by this time and since it isn’t then the likelihood of significant rate hikes becomes less and less. Meaning mortgage rates will stay in the mid to high sixes. I would expect this rate to last into the third quarter.
I thought this was an interesting slide. Just look at how certain segments of the economy have fared regarding inflation. What are we paying more for and what are we not paying more for?
All buyers should pay attention to this slide. If you’re wondering what the months are when sellers will most likely make a price drop on their home, hold onto this graph. It looks like October is the month when many sellers will drop their price, so you might wanna make an offer in that same month.
On a similar note, if you’re looking for the specific month of the year when the most listings are on the market or when you have the most inventory for purchase, then look at this graph and target May and June as your highest inventory months.
For all those buyers out there who are looking for that once in a lifetime deal, then look at this slide because it doesn’t bode well for a bottom feeder type of deal. The number of homes under water continues to be less and less. In fact, 89% of all homeowners in the United States with a mortgage are in that house at 5% or less. The housing market is clearly not overleveraged.
And for all of those who believe the home building industry is going to make up the deficit for the lack of inventory, then look at this slide. The building industry has been well under the long-term average for demand and it will take them another 10 to 15 years to catch up, if they even can.
There’s at least another good 15 or 20 slides that I’d love to share with you, but this story can’t go on forever. If you’d like to more information about those slides, then by all means, email me here at The Hawai`i Team and I’d be happy to share them with you. As always, we’d love an opportunity to earn your business. We would love to be your economist and Realtor of choice for our local Big Island market.
Dan Polimino is the owner of the Hawai`i Team in Kailua-Kona, Hawai`i. He and his team are the luxury residential experts for the Big Island. If you are thinking about buying or selling in Hawai’i, then please reach out to us at team@thehawaiiteam.com or call 808-913-0899.
