As we enter 2024 there are hopeful signs for home buyers. Interest rates continued to drop through the month of December to a rate of about 6.7%, down from a high of 7.8% in October of last year. With the Fed signaling that additional cuts may be on the horizon this is creating optimism amongst buyers.
Lower interest rates may also help sellers make the decision to list their home. Inventory levels continue to be low as current owners with low-rate mortgages remain reluctant to sell. This has led to a continued decline in year-over-year transaction volume and inventory levels in the market. This low interest rate reluctance is what economists call “golden handcuffs”. Existing homeowners with low interest rates are unwilling to let go of that interest rate unless absolutely necessary. Needing more square footage or a desire to downsize is not enough of an incentive to sell in this higher interest rate atmosphere. Hopefully as rates continue to drop, we will reach a level acceptable to those homeowner looking to upgrade or downsize their current home.
For January, inventory remains stagnant in accordance with typical seasonal patterns, and low inventory continues to pressure home prices in the region, which were up about 5% year-over-year. According to Selma Hepp, chief economist for CoreLogic, “strong home price gains over the course of the year indicate that home prices in most Washington state markets have fully recovered from 2022 losses and are reaching new highs once again.”
CoreLogic’s Home Price Index forecasts another 3.5% appreciation over the course of 2024.