Updated 2024 HOUSING MARKET PREDICTIONS

In mid-2024, the real estate landscape in Huntsville, Alabama is seeing evolving trends that are crucial for potential home buyers and sellers to consider. Updates in interest rates, home sales, new construction activities, rent dynamics, and home values are shaping the current housing market dynamics in Huntsville.

#1 Interest Rates

The first prediction was about interest rates. This prediction influences many of our other forecasts. Interest rate predictions were driven by the Fed's guidance, which indicated there would be three rate cuts in 2024, four in 2025, and additional ones in 2026.

That has not happened yet. Some people predict and think there will be some rate cuts by the end of the year, maybe one or two, or potentially none at all. Because of this, we have not seen the decrease in mortgage rates that many expected in 2024.

We predicted mid-6% for conventional rates, but they have been around 7% instead. We've been fluctuating around that rate all year. There are arguments that, with the upcoming election and inflation starting to decrease, the Fed rate may start to come down, leading to a decrease in 30-year mortgage rates.

So, we are currently around 7%. We predicted 6.5%, but it seems unlikely we will reach that. Our prediction was incorrect. I now believe we will see rates in the high 6% range by the end of the year. My revised estimate is around 6.75% for interest rates in the Huntsville market by December 2024.

#2 Homes Sold

Alright, so the second prediction was about the number of units sold across the US. Many expected a jump in sales due to predicted interest rate drops in 2024 and the low sales numbers in 2023. We anticipated a potential increase of 10% to 15%, which would translate to around 4 million to 4.5 million units, with the National Association of Realtors (NAR) even estimating around 4.7 million units. We also speculated that if interest rates dropped to 5.5%, sales could potentially reach 5 million units, though we acknowledged that would be a stretch. Long story short, whether 5 million or 4.5 million, both NAR's prediction and ours were wrong.

We are basically flat at mid-year. We're on pace to sell about the same number of homes as last year in terms of the overall Huntsville market. Looking specifically at the Huntsville area, our team is actually up 30% year over year. Thank you all for using and supporting Matt Curtis Real Estate.

In general, the market is flat, which is still a positive sign considering that interest rates have stayed elevated at 7%. If interest rates start to drop by the end of the year, that could push sales to a seasonally adjusted 4.25 million range, but I think we will be in the low 4 million range across the US, with only a slight increase if rates drop.

If we don't see a rate drop, I think sales will continue to stay flat in the Tennessee Valley for 2024.

#3 New Construction

So, the third prediction was about new home construction and sales. Builder sentiment was low when we made our predictions last time. We believed that with predicted decreases in interest rates, it would be a strong year for builders. They wouldn't need to offer as many incentives on new builds, and with ample inventory available, 2024 looked promising.

However, builders are having an average year, not reaching their full potential due to high interest rates. They are cutting into their margins with rate buy downs and aren't selling as many homes as they had hoped. Builder sentiment, currently below 50, suggests that by the end of 2024, it will be a below-average year for new construction. This is concerning for our local area and the entire US, given the significant shortage of homes nationwide—estimates range from 4 to 6 million homes short of demand.

Even if builders ramp up construction, it will take at least a decade to address this deficit. Unfortunately, with declining builder sentiment, construction is likely to decrease across the US, including in the Tennessee Valley, exacerbating our housing shortages.

Overall, new construction is facing challenges this year due to high interest rates, which will impact not only our area but also the broader US real estate economy going forward.

#4 Rent Prices

Our fourth prediction centered on rent prices. A majority of consumers, around 67%, believed that rent prices would keep rising. They expected an increase of about 5.6%, while I projected a more conservative 5% year-over-year appreciation in rent prices. However, these forecasts didn't account for the influx of new apartment inventory in the Huntsville area during 2024.

In reality, rent appreciation has not materialized as expected. Many apartment complexes in Huntsville have offered incentives, which have also affected the single-family rental market. If anything, rents have remained stable, possibly due to these incentives. It's a good opportunity to find deals on apartments right now. However, it's important to note that renting means all your rent payments go toward someone else's investment—none of it builds equity for you, unlike owning a home, which offers significant financial benefits.

Homeowners, on average, have four times the net worth of renters, thanks to home price appreciation, paying down mortgage principal, and additional advantages like tax deductions for mortgage interest and property taxes.

Unfortunately, the current rental market favors buyers, leading to a long-term liability for renters who miss out on building equity. Even if rents stay flat this year, inflation will likely cause rent prices to rise in the coming years. This contrasts with a 30-year fixed mortgage where payments remain steady over time, except for changes in insurance and taxes. While rent prices are stable now, this situation could tempt some into renting long-term, delaying the American dream of homeownership for local buyers in our market.

#5 Home Values

The last prediction was about home values, closely tied to interest rates. We forecasted that if rates remained at 7%, prices would stay steady. In reality, rates did stay at 7%, but prices have actually risen to around 4% to 5%, reflecting inflation trends in our local market.

We also predicted a 5% decrease if rates reached 8%. Although rates did briefly hit 8%, they have since dropped. Additionally, we anticipated double-digit price increases if rates fell to 5.5%, which hasn't occurred in 2024. I still believe this could happen if we don’t address the supply challenges across the country.

Currently, with rates at 7%, home values in the Huntsville, Alabama market have remained relatively stable, showing a slight increase. This has been positive for homeowners in our area. So, that summarizes where we stand with these five predictions.

Bonus Prediction

We also made a bonus prediction. The bonus prediction was that Matt Curtis Real Estate would win the number one team in Alabama for the fifth consecutive year. We are very humbled to announce that we have indeed won that award again. We are pleased to have gotten that prediction right for you all in 2024. Thank you for your continued support of Matt Curtis Real Estate.

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