Real Estate

The new year may bring new life

(Photo: Garey De Martini)

In mid-December the real estate market received an early Christmas gift. The Fed held interest rates steady at its Dec. 13 meeting. What’s more, the Fed also forecast that it’ll cut rates three times in 2024, up from their previous projection of two cuts. A rate hike next year is essentially off the table.

The stock market went wild, recording record highs over the next two days. Thanks to the Fed’s decision, the Dow rose 500 points on Dec. 13, and another 158 points the next day.

The decision may have an even greater impact on the real estate market. For more than a year the housing market has badly needed mortgage rates to come down. Would-be sellers have been handcuffed to low mortgage rates, and consequently have become reluctant to put their homes on the market. 

Inventory has suffered as a result. And even if a homebuyer has been lucky enough to find a place to buy, high interest rates have made the purchase far less appealing.


All this is about to change. Experts believe that mortgage rates should drop into the 6 percent range in 2024, around the middle of the year. According to Redfin, this is significant. It should stir sellers to bring more homes to the market, and it should give homebuyers more inventory to choose from as it widens the price range they can afford.

“We’re seeing a slight crack in the dam,” said Ron Wong with The Wong Tekulsky Team at Compass. “We don’t expect to have the floodgates burst open in 2024, but there are signs!”

Wong said that December — typically a slow month — was the busiest month of the year for his team. He said interest rates were already trending down, and buyers were beginning to prepare to renew their home searches. At the same time, according to Wong, local mortgage professionals reported an increase in new approvals.

Why did the Fed choose to announce that it was no longer increasing interest rates? It appears, at long last, that inflation is finally under control. 

Inflation has been falling gradually across the U.S. economy. According to CNBC, this process, known as disinflation, means prices for consumer goods and services are rising but at a slower pace than they had been. 

However, inflation has actually turned negative in some sectors, like energy. Deflation, as this dynamic is known, is the opposite of inflation: when prices are going down, not up.

Largely, deflation is happening on the “goods” side of the U.S. economy, or the tangible objects that Americans buy, according to the CNBC report.

There are several reasons for this. For one, a strong U.S. dollar makes imported goods cheaper. Some of those savings get passed on to consumers.

Another reason: Weaker demand may be a factor. Households that spent liberally on home goods in the early days of Covid-19 lockdowns are likely no longer doing so.

More broadly, the pandemic snarled global supply chains, causing shortages that fueled big spikes in prices. Energy costs surged when Russia invaded Ukraine, pushing up transportation and other distribution costs.

Now, supply chain disruptions are largely in the rearview mirror. The Federal Reserve Bank of New York’s Global Supply Chain Pressure Index, for example, has fallen back to prepandemic levels from historic highs at the end of 2021.

The U.S. consumer price index peaked at 9 percent in June 2022. By November 2023, it had declined to 3.1 percent.

It looks as though a recession has been averted, and the desired economic soft landing is assured. At the same time, cooling inflation and better price stability might very well improve the country’s economic mood, according to Redfin economist Chen Zhao. 


She writes as well that high housing costs are a major reason why a lot of Americans have concerns about their finances — even though much of the U.S. economy is strong on paper. Lower interest rates should help all around.

“People are feeling more confident,” said Mike Tekulsky with The Wong Tekulsky Team. “Some properties have generated more activity than you might expect. For example, we recently found ourselves competing with four other offers on a multi-unit building in the Lake Street Corridor. You don’t usually see that in November and December.”

Last year at this time, economists were predicting a bumpy real estate market in 2023. Turned out, they were exactly right. This year, economists seem to be more optimistic about what’s ahead. 

Problems with affordability and issues around insurance still exist in the city, but it’s good to know that at this point it looks like inflation and mortgage rates won’t be the huge obstacles they have been over the past year and a half.

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