LACKIE: Will interest rates dip and revive real estate market in 2024?

We may see some demand return to the market place in the new year but the demand will be tempered by consumer restraint

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How many of us are counting down the days until we can turn a new page and leave 2023 in the past?

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This year has been a rollercoaster – and not the fun kind.

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But as the year winds down it feels like there may be some cautious optimism out there, particularly in the real estate market, an arena still recovering from the bends of the high highs and low lows served up though the pandemic to today.

When inflation roared up and interest rates first started ticking upwards, everyone knew the party was over. I don’t think, however, that anyone expected the rates to go so high so quickly. They certainly didn’t expect them to stay there.

Soon there was tacit acceptance that “higher for longer” was to be the name of the game and it was like we all collectively leaned into the reality that in all sorts of ways, those sunny days of yore were firmly in the rear-view.

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Now that it seems the central banks may really be done, the real question has become when we might see the first interest rate reduction.

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Already we have narratives being spun that we are about to witness the market ignite once again. The central assumption seeming to be that while these elevated rates have been horrendous for affordability, the real problem has been consumer confidence in a falling market.

Even if one could comfortably swing the payment on a prospective property, the idea that they could be catching a falling knife with a market in free fall doesn’t do much to motivate a buyer.

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Instead, the boosters insist, the bottom is in – smart to get out there before competition returns and prices shoot up again.

Could that happen? I mean, maybe?

After months upon months of demand being seemingly non-existent, it’s hard not to notice the number of properties with fresh, new sold riders just in the past week. Unexpected to see a week before Christmas after an absolute snoozer of a fall market.

The inventory that we all saw as such a cause for concern has been steadily absorbed week-over-week. Evidently there were people waiting for a sign that the worst was over, and between Tiff Macklem and Jerome Powell, it would seem that sign is upon us.

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Except of course for the reality that our economy isn’t faring particularly well – we fell short of expectations with 0% GDP growth in October.

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Should even a mild recession be what’s next – and some would insist that it’s now – concerns around job stability will trump the real estate market FOMO each and every time. And what of a not-mild recession?

We also don’t know how many would-be sellers have been hedging their bets and waiting for the new year to list their properties. A deluge of supply, even in conjunction with an increase in buyers, will serve as headwind and keep prices down.

I don’t like making predictions, particularly in a format that may well exist on the interwebs in perpetuity. But my feeling is that while we are likely to see some demand come back to the market place in the new year as a result of fixed rate mortgages coming down off of the highs, this demand will be tempered by consumer restraint for a good long while.

Too much is at play. And these past 18-months have shown us exactly what the stakes are.

2024 be kind.

@brynnlackie

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