5 Bold Predictions For The Real Estate Game In 2024: Election Edition

2024 is shaping up to be a real estate game-changer. A high-stakes presidential election looms, interest rates are finally falling, home prices continue to rise, there’s trillions in cash on the sidelines, and pent-up demand for property purchases is explosive. We stand at the intersection of opportunity and challenge, a position that demands careful consideration for those navigating the path of buying or selling property this year. As we face these pressures, the question remains: “What happens next?”

Here’s what I predict:

1. Decreasing interest rates will drive buyers back into the market and cause prices to rise.

When interest rates started rising from sub-4% in the spring of 2022 as the Fed set out to tame inflation, hordes of would-be buyers withdrew from the market. As the initial shock of rising rates hit the real estate industry, home prices did initially fall, but by the end of 2023, they had rebounded and even surpassed their previous highs.

Now, consumers have accepted that rock-bottom rates are a thing of the past. After reaching a high of 8% in the fall of last year, the recent news of rates on the decline due to the Fed’s success in getting a hold on inflation caused the country to let out a collective sigh of relief. The Fed is incentivized to keep Biden in office, so they will help boost the economy during this election year to reflect positively on bidenomics and sway public opinion in his favor. This ‘Biden Bump’ will help to ensure rates will continue to head downward this year.

That’s great for buyers who are ready to go right now. A mortgage rate of 6.5% vs. 8% represents a savings of close to $400 per month on a median-priced home in the US.

There is enormous pent-up demand for property, however, and lower rates are going to bring the masses back to the table. As buyers return to the market, so will bidding wars, and we are going to see prices climb. The savings that today’s lower rates represent could be erased by rising home prices.

2. We will see an uptick in inventory, but not enough to satisfy demand.

Falling rates will not only be beneficial for hopeful home buyers but will also create better conditions for homeowners who are ready to sell.

Since 2022, the 80% of homeowners holding low-interest mortgages have perpetuated the pre-existing inventory shortage due to the “lock-in effect.” When rates rose from the mid-3% range to 7-8%, it became unrealistic for most homeowners to sell; trading their low rates for higher ones would cost them hundreds or thousands of dollars per month in additional interest. Ultimately, only 3.78 million homes were sold in the U.S. in 2023, lower than the number of homes sold in 2008. Now, as rates come down, the “lock-in effect” will ease for millions.

NAR Chief Economist Lawrence Yun has estimated that rates in the mid-6% range could make housing affordable for 4.5 million more American households. While that may be true, downsizing with higher rates could mean the same payment as a homeowner’s existing low-rate mortgage on their larger home. A larger home for growing households will still require homebuyers to accept increased monthly payments. In this climate, decisions about moving will hinge primarily on personal considerations such as maintenance concerns for the aging population, job relocations, or the pull to live near loved ones, more so than financial motivations.

Don’t expect a flood of inventory. For most homeowners, there is still more incentive to stay put than to sell. Yet, for those who are motivated to move, lower rates may provide the push they’ve been waiting for.

3. Demographics will continue to change as Americans make big moves.

Since the onset of the Pandemic, millions of Americans have made long-distance moves. That trend hasn’t changed, aided by the culture of remote work, people have continued to open up their home searches for all sorts of reasons including a preference for a certain climate or landscape, a desire for certain political and regulatory environments, the aforementioned pull to be near loved ones or simply the desire for a decreased cost of living and increased quality of life.

While there is still huge demand for the urban landscape, New York and L.A. are no longer the be-all and end-all as the cost too live in these major metropolitans continues to rise. There has been a huge generational shift toward “middle cities,” and places like St. Louis, New Orleans, and Detroit (to name a few) will continue to experience rapid growth as people choose the convenience and vibrance of an urban landscape while enjoying lower costs.

This poses important questions during this election cycle: Have certain areas become more or less entrenched in their previous political leanings? Have any swing states moved further in one direction? All will be revealed in November…

4. The Election may shift how people move, but it won’t impact whether they move.

Despite the talking points to the contrary that will inevitably become commonplace in the coming months, the data shows that elections do not necessarily result in a drop in the resale volume of primary residences [Statista]. With that said, many people do have anxiety about how the election results could impact their finances or the value of their home, which may lead to more emotional decision-making.

Sectors of the market that may see an impact during this election year are the luxury and investment markets, due to the potential tax implications of election results.

For most potential buyers and sellers, it is not a matter of if they will take the leap – after all, those decisions are typically driven by more than who is in the White House – but we do often see an impact on when they will make a move. The closer to election day and the more uncertain the results, the more the wait-and-see effect tends to take hold, but it is typically short-lived.

5. We will be thrown curveballs.

Anyone who says they know what’s going to happen in the future is lying or looking to make a buck. While we can make educated guesses, unexpected events are a guarantee, and they can make a huge impact.

In the years leading up to the Great Recession, no one was expecting a financial crisis of that magnitude. In 2019, I did not have “global pandemic” on my 2020 bingo card. Today, we live with the expanding threat of war, U.S. election interference, climate catastrophes, and other untold crises. But I do believe that in every market, there is a win. As I always say, “Markets do not dictate your outcome; markets dictate your strategy.”