Real Estate Articles
C.A.R. chief economist: ‘You don't get better off not owning a home'
California Association of Realtors vice president and chief economist Jodan Levine, who was a featured speaker at the recent Silicon Valley Association of Realtors general membership meeting, greeted members with a mildly optimistic outlook for 2024. Levine expects the current soft housing market to improve slowly in 2024 due to better mortgage interest rates, but don't expect the record low 3% mortgage interest rate to return anytime soon.
"The last mile on inflation is toughest. Rates will come down, but slowly," he said.
Levine said housing affordability problems will continue next year due to high home prices caused by strong demand and fewer homes for sale. Sales are expected to improve a little next year as interest rates come down, but the hyper-low interest rates that homeowners already have on their 30-year fixed interest rate mortgages will continue to be the limiting factor in sales growth.
On the economy and inflation, Levine stated, "We are going to be doing a little better than what the Fed would like to believe. It will not be 2008 all over again."
Levine explained that unlike the Great Recession, most homeowners today have a lot of equity - 95% have at least 20% equity in their homes and nearly 90% of homeowners have at least 30% equity. Foreclosures are unlikely.
Despite the forecast of lower interest rates likely happening, Levine expects curve balls in 2024 due to continued housing affordability challenges and a shortage of homes for sale that can't be fixed overnight. He stated all these challenges have the same solution: "Consumers need Realtors now more than ever."
The C.A.R. economist said consumers sitting on the sidelines are "misguided" if they expect to time the market and wait for interest rates to come down by much. That 2-3% mortgage interest rate is unlikely to happen again for a long time, if ever. Waiting is "wishful thinking" and even if rates come down it won't save them money since they would have to contend with multiple offers when it happens. They would not get that equity they would have received had they bought a home sooner. Levine suggested Realtors show their clients what payments (and savings) would look like at different mortgage interest percentage levels.
Sellers, on the other hand, need to be more strategic and manage their expectations. Levine said while transactions above $1 million are still strong, there is less buyer demand at every price point due to the higher mortgage rates.
"Tight inventory is the name of the game," said Levine. Two-thirds of homeowners have minimal motivation to move because they are locked in low rates. Then there is only one-third of the market with mortgages that are above the 4% interest rate who may consider selling their home if rates dropped closer to that rate.
"The data can be your friend. That's the recipe for success," Levine told Silicon Valley Realtors. "The benefits of homeownership are well-documented. It's about long-term benefits. You don't get better off (by) not owning a home."
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.