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Interest rates have plunged since October,
and are currently expected to drop further in 2024.
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Inflation is a huge factor in interest rates, consumer confidence, and housing and financial markets. Most analysts believe inflation will continue to fall in 2024.
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Consensus opinion is that the Fed will soon begin to drop its benchmark rate. Once it determines a change is appropriate, the Fed often acts quickly and decisively.
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Rarely have stock markets swung so dramatically from pessimism regarding economic trends to ebullient optimism as in the last 2 months of 2023.
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The effect of high interest rates on the number of new listings coming on market has had a staggering impact on supply & demand dynamics.
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Even as rising interest rates negatively affected affordability, the extremely low supply of homes for sale has maintained upward pressure on home prices.
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Home sales plunged in 2023, but if economic conditions continue to improve as currently forecast, both supply and demand should rise in 2024.
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Monthly accepted-offer activity, seen below, highlights the effects of market seasonality. Activity usually picks up rapidly in the 1st quarter to peak in spring.
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A long-term illustration of national median house sales prices - which defying expectations, saw a strong recovery in 2023 after the mid-2022 plunge.
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Perhaps due to their relative affordability, median prices of condos and co-ops rebounded even more than house prices to hit a new high last year.
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Across all national regions, there has been very substantial
home price appreciation over the past 5 years.
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Speed of sale is mostly determined by the intensity of buyer demand as compared to supply. Median days on market remain very low by long-term standards.
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As interest rates rose, so did the percentage of all-cash buyers - who have played an increasing role in supporting demand and home prices.
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One of the biggest factors behind demand is population change, especially migration, which has been a particularly important issue since the pandemic.
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The rate of new home construction is a critical dynamic in both the supply of homes for sale and housing affordability. It varies widely by state.
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