Residential real estate market in flux

If there are uncertainties in the U.S. economy they’re certainly reflected in the residential housing market, but just what those reflections look like depends to a certain extent on where you’re looking in the country and the scope of the data at which you’re looking.

Freddie Mac, the organization that was chartered by Congress in 1970 to support the U.S. housing system by buying loans and enabling banks to write new loans, thus ensuring a reliable and affordable supply of mortgage funds, understandably keeps close tabs on the market.

Freddie Mac reported that the average rate of a 30-year fixed-rate mortgage, as measured by Freddie Mac’s Primary Mortgage Market Survey, fell almost 0.8 percentage points from the last week in October through the first week in December.

“This decrease in rates is breathing some life back into the housing market with some potential homebuyers taking action that is reflected in home purchase applications, which increased 15% between mid-October and early December,” Freddie Mac reported. “However, demand is currently very sensitive to changes in mortgage rates and rates would need to fall further in order for purchase demand to continue to recover.”

Freddie Mac had found that in October the seasonally adjusted annual rate of home sales in the U.S. had fallen to 3.8 million units, the lowest level since summer of 2010.

Freddie Mac said it expects mortgage rates to gradually ease throughout 2024 but remain in the 6% to 7% range.

“While lower rates will help alleviate affordability issues, they will not be low enough to pull substantial inventory of existing homes into the market,” Freddie Mac predicted. “Thus, the home sales market in 2024 will look similar to 2023, characterized by low transaction volume and a severe lack of inventory. Additionally, the weaker economy and slower labor market will reduce demand.”

While Freddic Mac is forecasting some sluggishness in the housing market, it also forecast house prices to increase 2.7% in 2024, with some markets doing better than others.

“The low level of home sales will keep purchase mortgage origination volume down in the number of transactions, but the increase in house prices will drive a modest increase in the dollar volume of purchase originations,” Freddie Mac said.

It also expects that a decline in mortgage rates in 2024 will not be big enough to encourage many borrowers to refinance and it expects the number of refinance loans to be low in 2024. On the optimistic side, Freddie Mac said it believes the mortgage market should be significantly better for both purchase and refinance activity in 2025.

What Freddie Mac saw nationwide in 2023 closely parallels what the brokerage Houlihan Lawrence saw in 2023 in the New York City suburban markets that include Westchester and Fairfield. Nearly all luxury markets north of the city experienced double-digit declines in closed sales in 2023, many for the second consecutive year, according to Houlihan’s 2023 Luxury Market Report.

“This downward trend is due to lack of inventory exacerbated by high interest rates,” said Anthony P. Cutugno, senior vice president private brokerage at Houlihan Lawrence. “Interest rate cuts are projected in mid-2024, which will prompt more sellers to enter the market and help alleviate the inventory shortage.”

Cutugno said that on average luxury homes sold for close to 100% of the listing price. He said that young buyers have shown an interest in purchasing luxury homes built before 1940 because they have an interest in preservation and sustainability.

According to the Houlihan Lawrence report, 2023 saw 495 homes sold in the luxury category in Westchester, which is $2 million and up. That represented a 26.7% decline from the 675 luxury houses sold in 2022. The total dollar volume in the category was $1,547,664,255, a decline of 25.8% from the $2,084,952,896 worth of luxury properties sold in 2022. The median sale price was $2,725,000 in 2023 compared with $2,700,000 in 2022.

In Putnam and Dutchess Counties, where the luxury market begins at $1 million, there were 92 properties sold in 2023, a 39.1% drop from the 151 properties sold in 2022. Dollar volume in the luxury category was down 48.8%, falling from $287,608,194 in 2022 to $147,174,381 in 2023. The median sale price was $1,393,750 in 2023 compared with $1,450,0000 in 2022.

The luxury market was somewhat stronger in Greenwich, although the number of sales was down by 15.2% in 2023 compared with 2022. The luxury market in Greenwich begins at $3 million and 217 homes in that category sold in 2023, down from the 256 sales in 2022. The median sale price went up by 6.5% year over year, reaching $4,800,000 in 2023 from 2022’s $4,505,000.

Homes in Old Greenwich sold on average for 3.5% over the asking price according to Houlihan Lawrence. In Riverside, homes sold the quickest with an average of 47 days on the market.

“With a new year upon us, there are signs of optimism that could bode well for the first quarter,” said Liz Nunan, president and CEO of Houlihan Lawrence. “However, a presidential election year can often create uncertainty … which may favor buyers looking to negotiate a deal.”