As final numbers and statistics come in from the 2024 year revolving around money, business, real estate and other global economics data, I thought it would be appropriate to give an overview on the “State of Real Estate”
As a seasoned agent headed into my 5th year of the business, I can confidently say I’ve seen a lot from pandemics, all-time high home prices, volatile interest rates, and lots of new development. Over the years, one thing is apparent, no matter what’s going on in the world or what the news is saying, life still goes on and real estate transactions occur
EVERY. SINGLE. DAY.
So without further ado, here is The State of Real Estate!
The Lowest Amount of Transactions in 30 Years
The real estate market in 2024 hit a new all-time low for the amount of real estate transactions to occur in 30 years. For a reminder, the year 30 years ago was 1994, which is the same year Forrest Gump was released, “RUN FORREST RUN!” But in 2024, buyers were not running to purchase homes. Most of this has been due to increasing mortgage interest rates relative to the low rates in 2020 which at one point dipped below 3%! This not only has buyers anxious about taking on rates closer to 7%, but it also has many sellers reluctant on selling their homes knowing they will have to let go of such a low rate.
Secondly, home prices are at an all-time high, deterring some buyers from entering the market, but more on that later…
The New Age of First-Time Homebuyers
A common subject in the real estate world is the glorified, “First-Time Homebuyer.” Why? Because who doesn’t love the story of the underdog!? First-time homebuyers are a significant factor in a thriving real estate market and traditionally they have made up 40% of all home purchases prior to 2008. In last year’s report according to NAR (National Association of Realtors®), the first-time home buyer only comprised 24% of all buyers, sinking to a historic low. What’s more, to highlight the challenges first-time home buyers face, the median age for this buyer reached an all-time high of 38 years old in 2024, up from 35 the previous year. To give some historical reference, the average age of a first-time home buyer in 1980 was in their late 20s.
As we can see, the numbers show that first-time home buyers are struggling. The question is why? In short, there are three reasons why this buyer is struggling more than ever.
Home Prices As we know, home prices have hit all-time highs and continue to show steady increases year over year. This increase in home prices has made both the mortgage and the down payment increase as well.
Low Inventory a.k.a Competition A major cause of the increase in home prices is the historically low inventory we’ve seen since the pandemic. During the pandemic, the global economy came to a roaring halt, which dramatically caused a chain reaction to a reduced supply of new construction homes that are produced every year. Additionally, as mentioned above, interest rates hit a record low, causing potential sellers to refinance and think twice about selling and ultimately letting go of that low rate. All of this, in turn, has squeezed the supply of homes and raised demand. More demand means more competition between buyers.
Higher Cost of Entry As a result of high home prices, increased competition, and a relatively high interest rate, the overall cost of owning a home is high. When the purchase price increases, the down payment on a loan increases as well as the overall mortgage payment. This is then one additional hurdle and cost to factor in when a prospective buyer is looking into buying a home.
Home Prices
Yes, the big elephant in the room. Home Prices! It’s been the topic of conversation for five years now; homes are more expensive than ever before and for some of the nation, not showing any signs of slowing down. As I alluded to above, this ultimately has been caused by a lack of supply and increased consumer demand.
In addition to low inventory, material costs and labor shortages have also contributed to rising home prices. The cost of construction materials like lumber, concrete, and steel has increased substantially over the past few years. Builders also face labor shortages, making it more expensive and time-consuming to complete new homes, further reducing the housing supply.
Another factor is institutional investors and large real estate firms purchasing single-family homes as rental properties. This has created additional competition in an already tight market, making it even more difficult for individual buyers to secure homes at reasonable prices.
Despite these high prices, some markets have started seeing price adjustments, particularly in areas where rapid appreciation over the past few years may have outpaced what buyers are willing or able to pay. However, in many desirable locations, demand remains strong, and prices continue their upward trajectory.
The Real Estate Agent
You didn’t think I was going to go the entire blog without talking about myself now did you? The cornerstone to the ins and outs of the real estate market, the real estate agent. Here at your boots on the ground, your advisor, and yes, sometimes your therapist, we are very in tune with the market and what the consumer desires as it relates to their home. Contrary to popular belief, the real estate agent hasn’t had the most rosy year either. As you can guess, few transactions mean few deals between agents, and fewer deals mean a decrease in revenue and overall income. Yes, real estate agents have a life too, with bills, expenses, debt, and their dog! As a result, many agents have been exiting the industry! In 2024, 74% of licensed real estate agents nationwide sold 0-1 homes. For clarity, that means most agents lost money and paid to be a real estate agent without making a penny.
Now, what does this mean exactly? Well, just like the 80/20 rule, 20% of the agents do about 80% of the work. This means that there is an overwhelming number of agents who may not be as qualified to help you with your home journey as a seasoned agent. Now, this isn’t to say that new agents shouldn’t get their well-deserved shot in the business; that was me just a few years ago! But what it does say is that you as a consumer should be aware and educated as to who you are working with. Therefore, don’t hesitate to ask questions about their work ethic, past transactions they’ve been a part of, the broker or team they have supporting them, past client testimonials—anything that gives you a better frame of mind as to who you are working with is worth considering when making one of the biggest transactions of your life!
On a Positive Note
It’s not all doom and gloom. Anyone who knows me knows I am an optimistic person, and though I see the reality of all things, I try to focus on what I can control and you should too! The positive thing with all of this is every market goes through its own season, and we’re simply just in a different season of real estate.
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