Real Estate Forecast for 2024
An interesting thing is happening as we move toward the close of 2023 for real estate activity in Lake Tahoe. After the pandemic frenzy of buyers of 2020 and 2021, rising interest rates had the effect of stalling the market in 2022. The slow down in sales activity, however, isn't just because the buyer pool is reduced.
From 2022 to 2023, inventory began to decrease at the same time that year over year sales activity declined. Normally, fewer buyers lead to downward value adjustments, which didn’t happen in 2023. Overall, home values have held steady.
Sales Activity 2023
We began 2023 with sales each month tracking lower year over year compared to 2022. A big factor for lower sales was a drop in inventory levels. Like buyers, sellers too, were wary of listing their home for sale if it meant they would have to get a new loan at rates higher than what they have now.
However, by the 3rd Quarter, sales numbers increased to 80% of the ten-year average. That percentage has continued to grow through the fall and it looks like November sales for 2023 will be slightly higher than November 2022. This is a significant sign that the housing recession may have reached its bottom.
For comparison, during October 2023, 133 single family home sold, compared to only 82 in October 2022. November activity across the US and in Lake Tahoe should also track a bit higher.
In Lake Tahoe, we have a little over a 3-month supply of available listings. This number traditionally decreases during the holidays. As a world class ski destination, and after a few strong years of snow, the winter can actually bring more buyers to the table.
Interest Rates
Interest rates may have also peaked at their highest levels in 22 years. In November, the FED chose not to increase rates, as inflation had decreased to near their target level. Many believe they may be done tightening credit and this could significantly affect the 2024 real estate market.
The FED only raised the rate one time since May 2023. As banks grow more comfortable with current rates, they may begin to reduce their rates to spur more loan transactions in 2024. The current FED rate is 5.5%, higher than what they initially had forcast for slowing the rise of inflation.
The jump in sales activity in the fall was a direct result of interest rate reductions. The 30-year fixed rate declined from 7.76% on November 2nd to 7.5% on November 5th. Last month, rates were nearing 8%, just when buyers were growing comfortable with interest rates above 6%.
In March of 2023, many buyers were comparing a 6.4% rate to the unusually low rates below 4%, which the government used to spur the pandemic recovery. Today, there are many buyers who probably wish they would have locked in a 6% interest rate.
2024 Real Estate Forecast
With median prices in all areas of Lake Tahoe exceeding $1 million, the lack of transactions did little to affect overall sales volume, which rose year over year.
As we close the year with year over year sales numbers holding steady for the first time since the beginning of 2021, many forecasters predict a stronger market in 2024. While values have held steady, sellers are a bit more negotiable on inspections and repairs, with slight reductions from listing price.
18% of homes sales in the 3rd Quarter were over $2 million, which matches to 2022. As winter approaches, sales activity remains strong, even while sellers are still hesitant to list their property. Lake Tahoe has an enormous feeder market in the Bay Area and demand continues to absorb what little inventory we have.
Additionally, many purchases in Lake Tahoe are cash. Traditionally, stronger stock market activity is good for the luxury market, as investors re-allocate their holdings.
Lower inventory levels usually signal a seller’s market. However, buyers will find that they will have the opportunity to negotiate more in this current market.
If you are thinking of listing your home for sale, this would be an excellent time to do so. Higher median prices also means you can get top dollar for your home. Contact me today for a free property valuation.