Last year, we made predictions for what 2023 would bring.
And while it did not bring back the return of a normal market, like we had hoped, it did prove to be fairly predictable.
In this blog, we look back on our predictions to see how close we came to forecasting 2023. Then, we will go over all of our top predictions for 2024.
Looking Back at Our 2023 Predictions
2023 Interest Rates
Back in 2022 we anticipated a surge in interest rates early into 2023, followed by a subsequent decline.
The year started in the low sixes, and was fairly consistent leading to its peak in August. Since, we have been hovering in the quarter to mid sevens, but we see a silver lining.
Even in just the past few weeks we have seen a downward trend on these rates, which we think is the beginning of that mentioned gradual decrease.
We will get more into how that may affect 2024 below.
2023 Home Prices
No one, including us, expected to see prices rise or fall dramatically, interest rates made sure of that.
In hindsight, the year had the typical “wait and see” trajectory. Most of the year was slow for our brokerage team, and market in general. We marked the 22nd consecutive month of declining home sales. That’s a statistic that no one can ignore.
In September however, the market started heating up.
November was our best month of the year, which you will not hear frequently from anyone in real estate.
It seemed once fall hit the general consensus was…
“Interest rates aren’t going to drop like I had hoped.”
“Home prices aren’t going to drop like I had hoped.”
“If I want to make a move…then I just have to make it.”
So in the fourth quarter we have seen just that – people are once again making moves.
Late Q4 into an early 2024 Q1 might be your best time to buy. We are seeing a lot of seller concessions, and even some lower interest rates for investment deals,
While prices did have a slight dip, overall prices are still 4.3% higher than this time last year, so if you’re waiting for a bigger dip- it may prove fruitless.
We will speak more on what this means for 2024 in a bit.
2023 Rental Rates
A year ago, we predicted that rent rates would continue to grow steadily throughout 2023.
And we were right- for the most part.
There were increases throughout Indianapolis and nation-wide.
Rates ended up reaching a record high of $1,561 in October for single-family properties in Indianapolis. The surge was short lived as November saw a slight decline to $1,537.
We are seeing and anticipating a further decline in rents for December leading into Q1.
The general consensus is the rental market has shifted, and property managers and investors need to adapt. Unlike a few years ago when properties could secure maximum rent even with minor imperfections, the current market demands a meticulous approach.
Prospective tenants are becoming more discerning, and investors must present pristine rental products to stand out in a market with multiple options.
The good news: we do not anticipate any major decline in rental rates, but there may be more competition than in previous years, so plan accordingly.
Looking Forward to Our 2024 Predictions
2024 Interest Rates
There’s been a lot of talk spent on interest rates. Probably the most talk in recent history.
We are predicting interest rates will hover around the low to mid-six percent range by the end of 2024. While a further reduction may be expected, pushing rates into the 5 percent range could potentially spark another market frenzy, drawing a surge of participants back into the real estate market.
Despite the ongoing recovery from the impact of COVID-19, most major players anticipate and are in the works of a downward trend in interest rates.
And if you haven’t heard- Federal Reserve signals were sent about a planned series of rate cuts in 2024, with a quarter-percent reduction in each instance. The experts speculated on the potential impact of these cuts, considering factors such as market stability and housing prices.
So we will see how many we get, and how the market may react.
2024 Home Prices
This all depends on the above. We predict home prices will interplay with interest rates throughout 2024.
Unless there is a significant drop below the 6 percent mark in interest rates, the likelihood of a dramatic spike in pricing, like the one we saw during COVID, seems unlikely. We predict numbers will hold fairly steady if the interest rates drop intermittently throughout the year.
There is also still a severe lack of inventory in Central Indiana and throughout the nation. This supports home prices, and due to this we do not anticipate any major decreases in listings.
Which is good news for investors: the lack of inventory minimizes risk, even with higher than desired interest rates.
We predict about a 5% increase in housing. This push and pull of interest rates and inventory, while frustrating, does stabilize pricing all around.
On the other hand, realtor.com predicts a 1.7% decline in prices throughout specific Indianapolis pockets. So whichever way prices turn, we are almost certain there will be no drastic shifts.
2024 Rental Rates
There was a prolonged period at the beginning of 2023 where the rental market was…sluggish. This persisted until early spring where we finally saw an uptick of rental applications.
Is this the new normal? Does our busy season in Indiana now start later than ever?
Yes and no. We think this could still just be an effect from COVID, and we are hoping 2024 will finally bring us to our normal pace of January picking up steam quickly, but it seems unlikely.
We do expect the rental market to follow the housing market. We anticipate small changes here and there- but no big surprises when it comes to rates.
Most likely, rates will reduce in Q1, and rebound towards the beginning of Q2.
We would love to start 2024 with a fiery start- but we predict more of a slow burn like we saw last year.
The one surprise you do need to prepare for however is something we have been preaching for the past couple months:
There are a lot of choices when it comes to renting- and we expect the options to open up even more in 2024. Make sure your properties are in great shape.
We advise leasing managers and property owners to pay close attention to pricing, recognizing that the market dictates the value of a property.
Happy New Year!
Whatever 2024 may bring, we anticipate another year of unpredictable trends, many of which rely on interest rates.
We wish everyone a happy holiday season, and hope for a very fruitful 2024!