Predictions for the Ann Arbor Area Housing Market for 2024
What can we expect in terms of interest rates, prices and affordability in 2024?
Disclaimer- No part of this was written by a third party or a robot.
Market Stats as of 2/2/24:
30 Year Fixed Rate Mortgage- 6.63% (up from last year)
15 Year Fixed Rate Mortgage- 5.94% (up from last year)
CPI (Dec. Inflation)- 3.4% (lower than last year)
Inventory of Homes for Sale- Low (same)
What Did the Ann Arbor Area Housing Market Experience in 2023?
It was a tough year to be in the market to buy a home – the toughest in recent history. The same can be said for many in the real estate sales or lending business. Sellers, on the other hand, did very well and, surprisingly, so did the investors I helped.
Sellers did well because they have a product MANY people want (especially those who own homes in the Ann Arbor area!) and because there are fewer properties available for buyers to choose from. With many investors pulling back because of higher rates, there was less competition for the investors that stayed in the game.
In general, it is hard to sell a product that simultaneously is going up in price while the financing of that product also keeps getting more expensive! But Ann Arbor real estate in particular spurned conventional wisdom on this point.
The sales data from the Ann Arbor Board of Realtors confirmed that narrative all year.
Inventory of new homes for sale kept falling.
As interest rates climbed, so did days on market.
Prices, on average, continued to climb higher.
This resulted in fewer overall transactions.
Affordability continued to get worse.
Surprisingly, rent increases started to soften. (potentially because people with properties with low interest rate mortgages decided to rent their home as an asset rather than sell or rent part of their home for extra income, bringing more rentals units to the market.)
Chart from rentcafe.com
The word I kept using to describe the market was dysfunctional.
It was still very common to have multiple-offer situations for buyers and cash did not always win because someone always has more cash.
The good news is that people will always need a place to live – and life happens to all of us – so there will always be properties changing hands.
The Ann Arbor area remains a desirable place to live, work and go to school, so the demand for housing will remain strong despite it becoming less affordable in 2023.
The reality from a real estate agent’s standpoint is competing for fewer transactions with all the other real estate sales agents and lenders only makes you better and stronger.
What is Happening at the Start of 2024?
I just had a conversation with one of my mortgage lending partners about what 2024 will hold for real estate sales.
He recalled how the agents he works with were looking for a rebound in sales volume (number of transactions) as mortgage rates are expected to fall some this year, but both of us agreed that 2024 is going to look and feel a lot like 2023.
The data doesn’t lie.
Mortgage interest rates are higher at the beginning of this year than they were at the beginning of last year. Just under 6.5% last January and 6.63% this year.
2. The inventory of properties for sale has decreased 30% since this time last year, continuing to put upward pressure on prices.
3. Median sales prices are up almost 7% for the year.
This does not help the ongoing affordability problem.
The majority of potential sellers still have a mortgage rate between 2-4% with no real reason – other than a life change – to move and sell the house.
Add to that the national labor market softening, job layoffs in the news, an election year, and multiple geopolitical conflicts and you have a bunch of uncertainty.
When people feel uncertain, they pull back and wait to see what happens if they can.
Thus, I think the Ann Arbor area housing market will closely resemble last year’s market.
“There is always opportunity in any market. The key is to know where to look and what strategies to employ to succeed.”
What Can We Expect For the Rest of 2024 in the Ann Arbor Area Housing Market?
The short answer is more of the same.
1. Mortgage interest rates will fall some – maybe by a percentage point by the end of the year from where they are now. This will be offset by greater demand and prices as a result.
2. Inventory will continue to remain at historic lows – most people still have mortgages at 4% or lower with no incentive to sell.
3. Prices will continue to rise – there really is no other outcome because of the lack of inventory for sale.
4. Rents will be softer with smaller increases – expect rents to be softer or smaller increases as more people decide to rent their homes or part of their homes.
5. Affordability will get worse – even with rents softening they will be higher than they were on average and mortgage payments will remain high with elevated interest rates and purchase prices.
So, what can you do to thrive in 2024?
Think and act like and investor and work with a real estate professional that is an investor themselves.
How Can You Position Yourself to Win in 2024 in the Ann Arbor Area Housing Market?
There is always opportunity in any market. The key is to know where to look and what strategies to employ to succeed.
As a Buyer, avoid multiple offer situations, always do an inspection, and look for properties to add value to.
As a Seller, sell in the spring and summer when there is the most demand, stage your house to get ready to sell, and don’t overprice it.
As an Investor, avoid multiple-offer situations, know your numbers and don’t get emotional about a property, always do an inspection, and look for properties to add value to.
As a Renter, do a rent comparison with your unit compared to similar units and negotiate with your landlord and find a way to save for a property of your own so you can benefit from locking in your payment.
Whether you are a buyer, seller, investor, or renter there are ways to win in this market.
Bottom Line for the Ann Arbor Area Housing Market for 2024
The housing market will be much like it was last year.
Mortgage interest rates will still be higher than what most people have on their existing homes.
This will keep the inventory of homes for sale historically low as sellers are reluctant to sell unless they have a life change or significant reason to do so.
Some homeowners will opt to rent their homes or part of their homes rather than sell as they see their low mortgage interest rate as an asset. This will help moderate rents.
The lack of inventory will continue to push prices higher as there are still more buyers than properties for sale.
This will make affordability worse.
However, there are opportunities in every market and it pays to think and act like an investor to win
To your success!
About Us
Arbor Advising has a passion for helping people buy, sell, and invest in real estate.
