Jan 16, 2024
For most of 2023, homebuyers faced a daunting real estate market marked by dizzyingly high mortgage rates. Combined with steep home prices and a severe shortage of homes for sale, it’s no wonder many struggled or gave up their home search entirely.
But with this new year comes new hope: Could homebuyers get a break?
If you’re gearing up to buy a house soon, it’s time to forget the horror stories of last year and reset your expectations. Below are the old rules that no longer apply to the current real estate market—plus the new ones that will take their place this year.
1. Old rule: Mortgage rates are so high, buying a house might not make sense
New rule: Rates are ebbing, so they shouldn’t stop buyers
In late 2023, mortgage interest rates hit highs around 8%, but they started falling to the mid-6% range by mid-December. While rates are anticipated to creep up due to recent higher-than-expected inflation reports, most real estate experts say they won’t approach the highs seen last year.
“Homes are going to fly off the market again, as there is pent-up demand while buyers hibernated during the skyrocketing mortgage rates,” says Elizabeth Sugar Boese, a real estate agent in Boulder, CO. “Now that rates have come down, buyers are coming back and [are] eager to buy.”
Max Carr, a real estate agent in California’s Orange County, notes that some potential buyers might still be holding out. They’re hoping rates will drop even further—perhaps back to COVID-19 pandemic levels in the mid-2% range.
However, waiting to buy is likely unwise, he says. Today’s buyers need to get comfortable with the “new normal” interest rates.
“While rates may improve slightly, anyone waiting for rates in the 2% range again is liable to miss the boat entirely,” he says, “and miss out on a large amount of equity in the process.”
2. Old rule: Buyers won’t face much competition
New rule: Competition for homes will be fierce
In 2023, home shoppers who were willing to get out there despite high rates were rewarded with less competition in the marketplace. This won’t be the case going into 2024, warns Carr.
If rates continue to drop, as anticipated, competition “may get fiercer, quickly,” he warns.
Already, he’s noticed homes in his area selling faster.
“The average home in Irvine, CA, for instance, only sits on the market for 37 days, which is notably lower than the county’s average of 53 days,” he says. “That number seems to be getting lower, as buyers are shaking off their holiday hibernation and jumping back into the market.”
3. Old rule: Sellers won’t bend much to buyer demands
New rule: Some sellers will make concessions
With so few homes on the market, we’re technically still in a seller’s market. In past years, this meant that sellers didn’t need to negotiate much with buyers. But with more new listings entering the market in 2024, it isn’t as favorable for sellers now. This means there’s going to be some wiggle room for buyers.
Cindy Allen, a real estate agent in the Dallas and Fort Worth, TX, area, has recently seen sellers offering a variety of concessions that can help bring buyers to the closing table.
4. Old rule: Buyers must make their best and highest offer to get attention from sellers
New rule: Any reasonable offer could do the trick
Since the number of homes on the market has been so constrained, many sellers got used to the idea of receiving multiple offers, often above the asking price. Desperate buyers were often forced to play along.
Those days are more or less gone now in all but the most competitive markets. With more fresh listings, Allen says, buyers should “still aim to make a reasonable offer. Even if there are multiple bids, there are other homes available to choose from.”
She recalls one of her recent listings, which was sold the first weekend on the market. She says she was surprised when the buyer “came roaring in with an offer above the asking price,” noting that such an aggressive offer wasn’t necessary.
“Don’t get me wrong, I am happy for the seller,” she says. “But the sellers were prepared to accept an offer 3% or 4% off the asking price. The other agent said the buyer had friends who recently bought and told him he needed to offer over asking to have a chance at a property. I think those friends must have bought a while back.”
5. Old rule: If you like a house, submit an official offer ASAP
New rule: Make a ‘soft offer’ to see what kind of deal you can get
Back in the pandemic market, things moved quickly. Buyers had to get their offers in pronto if they wanted to stand a chance. This desperate pace has since slowed somewhat.
Jonathan Spears, a real estate agent based in Florida and the founder of Spears Group, says that buyers have some time to come up with a bid that feels comfortable.
“You’re not in writing, you’re not committing to the offer price, but you’re now able to test the waters before you get [it] on paper,” Spears says. “It opens up conversation, and then the real estate professional is able to gather more information that can potentially help the buyer get a great deal. Where, before, in a tight market where a property doesn’t last very long, a seller’s willingness to negotiate is relatively low.”
6. Old rule: Buy to flip and make quick money
New rule: Long-term investments make the most sense
In recent years, plenty of real estate investors made a fortune flipping properties. They would buy a home cheap, fix it up, and sell it for a big profit. But times are tough for flippers today. In most markets, there’s often little to no room to turn a profit.
As a result, a buy-and-hold philosophy might be a better bet for 2024, and beyond.
“If you’re going to buy, you [rarely] lose on real estate when you focus on it being a long-term investment,” says Spears. Today’s buyers would do well to buy a home they can stay in for at least five years.
“It shouldn’t be something that’s like, ‘I’m only gonna own this for six months, and I’m going to try to turn around and speculate,’” he cautions.