Dana Anderson of Redfin reports this week that listing consults with its agents have risen significantly since rates began to fall. Redfin economists “expect buyers will take advantage of lower rates and more listings in the new year, after the typical holiday slowdown.” This suggests the frozen 2023 market will thaw in 2024, according to Anderson.

Robert Dietz of the National Association of Homebuilders (NAHB) reports that new home sales were down in November but that sales are expected to rise in the new year. New builds still make up oversized total homes for sale, with 31% of total inventory being new builds, compared with the 12% historical average. 

Hannah Jones of Realtor.com reports on existing home sales, which increased 0.8% in November, stopping five straight months of declines. That said, overall sales were still down 7.3% annually.

Source: Realtor.com (December 2023)

“Though November’s data shows a market still struggling with affordability, the recent progress in inflation and decline in mortgage rates suggests that a shift is ahead in 2024. We expect existing home sales to remain steady in 2024, but lower mortgage rates, lower home prices, and lower rents will make housing slightly more navigable. Though a home purchase may still be out of reach for many buyers, the rental market could offer options.”

Finally, Fannie Mae believes that home sales and mortgage originations will make a slow recovery heading into 2024: “Single-family home sales likely bottomed out in Q4 2023 and, due to the recent pullback in mortgage rates, are expected to begin a slow but meaningful recovery over the course of the next year, alongside upward-trending mortgage origination activity.”

Rents

CoreLogic released its December Single-Family Rent Report, highlighting that SFR rents jumped 2.5% annually in October, the 18th straight month of rent growth deceleration. Median renter households now pay $500 a month more per month than they did in 2020. San Diego is the metro with the most significant rent increase at 5.2% annual growth, followed by St. Louis, Boston, and New York.

Source: CoreLogic (December 2023)

Lily Katz of Redfin reports on median national rents, which fell 2% annually in November, the most significant decline since 2020. That said, rents are still increasing in the Midwest due to ongoing positive inward migration as people seek affordability. The national average asking rent now sits at $1,967.

Source: Redfin (December 2023)

Redfin Chief Economist Daryl Fairweather comments on the current situation: 

“Renters are finally catching a break. Better deals are easier to come by because landlords are doling out concessions and rents have started falling in a meaningful way. Rising supply also means renters have more good options to choose from…With homeownership so expensive, renting has started to lose its stigma. Still, we may see more renters jump into the homebuying market next year as home-sale prices and mortgage rates tick down.”

Part of the reason for this decline in rents is the ongoing supply boom in the apartment industry. Redfin continues its reporting, highlighting that completed apartments rose 7% annually in Q3 2023, one of the highest levels seen in 30 years. Further, the number of apartments currently under construction is at record highs, pointing to an ongoing supply increase which will put downward pressure on rents in the coming year.

Source: Redfin (December 2023)

Indeed, Zumper’s Annual Report highlights that alongside decreasing rents in 2024, we will also see an attitude shift toward renting, which will be more favorably looked on as homeownership costs strain would-be buyers.

“Thanks to sky-high interest rates, an uncertain economic climate, changing priorities and ongoing hybrid- and remote-work policies, consumer sentiment towards home ownership is at an all-time low. For the second year in a row, more than half of renters believe “the new American dream is being untethered to home ownership.” And, more than 69 percent of renters said rising interest rates have deterred them from buying or looking into buying a home.”

Investor activity

Thomas Malone of CoreLogic reports on investor activity, noting that as home flippers and larger investors take a backseat, smaller investors show resilience. In July, August, and September, investors purchased 26.8%, 27.2%, and 28%, respectively, of the share of single-family homes. Given this, CoreLogic expects to see these numbers climb above 30% in the near future.

Source: CoreLogic (December 2023)

“Smaller investors continue to make up most of that buyer segment. Figure 3 shows that throughout 2023, mega-investors (those that own 1,000 or more properties) and large investors (those that own of 100 to 999 properties) each held market shares of about 10% in the third quarter. The medium investor share (those that own 10 to 99 properties) slid slightly from 36% to 35%, and small investor activity (those that own three to nine properties) held steady at around 45%.”

ATTOM Data Solutions reports on flipping activity, which although it is seeing profits rise, is declining overall in activity. In Q3 2023, flippers represented 7.2% of total home sales, down from 7.9% in Q2, and is now the lowest point in two years. Akron, OH had the highest portion of profits for any metro nationwide.

Source: ATTOM Data Solutions (December 2023)

“But even as flipping rates declined, the latest analysis also revealed that fortunes continued improving for home flippers during the third quarter in the form of rising profits. Investor returns increased for the third quarter in a row, rebounding from a slump that had slashed profit margins by nearly two-thirds from early-2021 to late-2022. Margins, along with raw profits, rose to the highest levels since the middle of last year.”

In good news for new investors, Fannie Mae reportedly cut downpayment requirements for smaller owner-occupied multifamily properties. Now, instead of paying 15-25% down, Fannie Mae will only require 5% if the investor is going to occupy one of the units in the apartment. This new rule change applies to smaller multifamily units of 4 units or less.