2024 Real Estate Market: Navigating the Stormy Seas

Home for sale© DOUGBERRY from Getty Images Signature / Canva

DOYLESTOWN, PA — As the calendar flipped to 2024, an ominous cloud loomed over the real estate market. With interest rates touching a two-decade high and inflation reaching a peak unseen in 40 years, buyers and investors alike are adopting a prudent “wait and see” approach. This shift comes amid growing speculation of a potential crash in the real estate market.

The recent surge in interest rates has been significant. Data from Bank of America reveals that rates for a 30-year fixed mortgage have skyrocketed to 7.25%, a substantial jump from the 3.15% seen in 2021. This uptick is causing ripples of concern among prospective homeowners and investors, stirring up memories of past housing market crashes.

Adding to the uncertainty, the government’s inconsistent stance on interest rates has left many Americans perplexed. Despite indications in December 2023 of three rate cuts in the coming year, none have materialized so far. The Federal Reserve, in its January 2024 meeting, elected to maintain interest rates at their current levels, citing the need for sustained evidence of stabilized inflation.

This climate of uncertainty is reflected in consumer sentiment. According to Fannie Mac’s National Housing Survey, a mere 14% of Americans believe it’s a good time to buy a home. As whispers of a looming recession grow louder, homeowners and real estate investors are bracing for a bumpy road ahead.

So, what should be the course of action in these turbulent times? Ron Isgate, a prominent Doylestown real estate lawyer, offers some sage advice.

For homeowners eyeing a move due to necessity or having found their dream home, Isgate recommends going ahead with the purchase. The goal, he suggests, should be to refinance when rates eventually dip. However, for those merely contemplating a change, he advises waiting to see how the market evolves over the coming months.

Sellers, too, should tread carefully. Those enjoying a low interest rate may want to delay selling. However, those with a higher rate in the 6-7% range shouldn’t hesitate to make the move.

For those considering investing in real estate, Isgate foresees a significant shake-up on the horizon. Bloomberg.com reports that a staggering $1.5 trillion of commercial real estate debt is due for repayment by the end of 2025. Many of these loans were barely passable when rates were in the low to mid 3’s. Now, faced with the prospect of refinancing into programs with interest rates well into the 7% range, it’s a recipe for trouble. With banks tightening their belts and demanding higher Debt Service Coverage Ratio (DSCR), property owners will have limited options: sell at a lower price, refinance with out-of-pocket funds, or face foreclosure. For savvy investors, however, this could present an opportunity to acquire properties at discounted rates.

In conclusion, homeowners are advised to tread carefully, keeping an eye on potential refinancing opportunities. Investors, meanwhile, might do well to hold off for the next 12 months, watching for a potential influx of commercial properties resetting their loans.

Ron Isgate, Esq., a seasoned real estate attorney, associate broker with eXp Commercial, and hard money lender at Stone Commercial Capital, brings a unique blend of expertise to the current landscape. His advice is sure to be a beacon for those navigating the stormy seas of the 2024 real estate market.

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