“Golden handcuffs” have kept lots of sellers in their current homes for the last two years. Potential sellers have felt stuck, locked with “golden handcuffs” into their 3 or 4% mortgages, unwilling to sell and be forced to take a new mortgage at 75 or 8%. The good news is that mortgage rates have started to come down this month as the Fed appears to have finished its series of aggressive rate hikes – and some sellers are tired of being stuck in a home that no longer works for them.
Life Goes On
While we have been waiting for mortgage rates to drop, life has gone on – job changes, retirements, new babies, divorces and marriages. With 3% mortgage rates fading into the past (but with the expectation of lower rates than 2023), Lisa Sturtevant, the economist for Bright, our local multiple listing service, says that 2024 is the time that many homeowners locked down by these “golden handcuffs” will accept the fact they have to move.
Golden Handcuffs Off Means More Inventory
We need more inventory! The Mid-Atlantic market has seen a recent increase in new listings year over year, suggesting that there is a little bit of movement by sellers who may have been holding out until now. This influx of sellers should propel sales and inventory close to 2019 levels by the end of 2024. However, the slight increase in inventory will not reduce home prices noticeably.
Rates are also expected to improve by the spring, hitting 6.5% by the spring and 6.2.% by year end. The lower rates should encourage people to list their homes since the move to the next home will be painful if rates are lower and the payments are less. However, there is some expectation that it will be long-term homeowners with lots of equity who will be the first ones to move. Lots of equity means a possible conforming mortgage on the next home (with a slightly lower rate) or no mortgage at all if the next home is a downsize. Newer homeowners with little equity will likely stay put for longer.
Not a Buyer’s Market Yet
As sellers give up their golden handcuffs, it still will not be a buyer’s market. However, buyers should be better off in 2024 than in 2023, or maybe in the past couple years. New construction will continue to be a major factor, and as builders offer concessions, mortgage points and various other incentives to attract buyers, exiting homeowners will have to follow suit in order to compete. The experts expect a more balanced market, not because there’s going to be four to six months of inventory, which is how we often define balance, but the transaction will feel more balanced.
So what does all this mean? A few things: Inventory is very tight still so if you are downsizing to a retirement community like Fox Hill or Maplewood or to a rental near friends and family, this is a great time to sell. It is still a great time to sell if you are thinking of moving to a new home because prices are still very high. Well priced and well prepared homes sell very quickly. If you are a buyer, don’t despair. Inventory and rates all are expected to improve in 2024 – and I would love to help you find that dream home.