Featuring the perspectives of local brokerage executives:

Matthew Gardner
Chief Economist, Windermere Real Estate

John Manning
Managing Broker, REALTOR®, RE/MAX Gateway

Rob McGarty
Founder and Broker, Bushwick Real Estate Services

What do you expect for the overall housing market for 2024? Up, down or stable? Why?

Matthew Gardner: I don’t expect to see much change at all. Supply will remain anemic, and this will keep sales well below normalized levels, but they should be modestly higher than in 2023. New construction could take an increasing share of listings and sales, but this will only be because of current homeowners’ reluctance to move. I also expect prices to rise in 2024 but at very modest rates.

John Manning: In 2024, we will see real estate markets perform differently, depending on their underlying fundamentals. For example, we expect the metropolitan Puget Sound market in Washington to remain resilient. Barring a major economic setback, prices in and around Seattle should modestly increase. This strength is the result of ultra-low unemployment and a world-class portfolio of employers in the area. At the same time, more vulnerable regions and those that saw disproportionate growth from COVID-era influxes of remote workers may see prices decline as employers increasingly demand a return to office.

Rob McGarty: I expect the housing market in the core Seattle and Eastside Cities will be up in 2024 because of lower interest rates, demand for shorter commute times and natural supply constraints.

Interest rates remain the biggest challenge with today’s market. I predict that the Fed will hold the Fed rate flat for the next few meetings which will likely drive mortgage rates down. The Fed rate does NOT equal mortgage rates. We won’t see 3% again, but I think we’ll see 6% mortgages by Q2. Lower mortgage rates increase buying power and affordability, likely resulting in our typical spring bidding wars.

As the work-from-home trend recalibrates, and more folks head back to the office, I believe that we’ll see a surge in demand for homes in core locations with shorter commutes. We’ll likely see people who moved further out regret that decision and more homes for sale in the outlying areas.

Single-family homes will remain a hot commodity with limited supply, thanks to natural land limitations and the rise of accidental landlords. There’s no reason for many people to sell when their home will have positive cash flow because of their 3% mortgage rate.

If you’re contemplating a home purchase, now is the time to negotiate that deal before the market heats back up again in 2024. Remember, we saw the exact same thing happen this time last year. Q4 2022 was slow and buyer demand returned in Q1 2023 even though mortgage rates held flat.

Do you think any segments of the residential market will see growth in 2024? (new construction, rural, luxury, etc.)

McGarty: I think we will see growth in both quantity and prices of new construction because buyer demand will increase as rates come down.

I expect rural markets to continue to decline as demand for second homes wanes because the short-term rental market remains oversaturated and discretionary spending is reigned in.

Value luxury as defined by some luxurious features like waterfront, acreage, prestigious location will remain brisk as there will be plenty of tech money flowing in town. Opulent luxury will slow down, and we’ll likely see price compression in that segment.

Manning: Mid-market single-family homes should continue to see growth due to strong employment and a continued imbalance between supply and demand. In the Seattle market, there are simply too few homes available to satisfy demand, even with significant interest rate increases since 2022.

Gardner: Single-family, new construction has the potential to take more market share. The luxury market will be subdued, not because of a lack of inventory, but because buyers have become increasingly picky. Homes available to buy need to be move-in ready, or they will be passed over.

What growth, if any, do you expect for your company next year? Do you expect your business to thrive, decline or remain stable? Why?

McGarty: As a leader, I expect my company to grow indefinitely. In reality, we’re coming off the hottest market I’ve seen in my 18-year real estate career. The last two years were down for us, and I feel like we’ve hit bottom. I expect to see our business grow in 2024, as we are seeing more clients who need to buy and sell.

Manning: Unless the underlying market shifts significantly, we expect company growth to continue in 2024 consistent with our very strong 2023. Having been through multiple corrections and market shifts in the past, our business was prepared well in advance of the current market conditions.

What will be the biggest challenges for agents in 2024? How can they overcome these challenges?

Manning: Career-professional experienced agents will continue to thrive, while many of the part-time or side-hustle agents that entered the market in recent years are expected to drop off.

Gardner: For sellers’ agents, it will be getting listings. A full 85.5% of homeowners with mortgages in Washington State have a rate below 5%, which means they have little incentive to sell. Buyers agents will have to get across to hesitant clients that the market is going to improve, that rates will start to drop, and if they do find the home of their dreams, they would be better off buying now and refinancing down the road rather than waiting.

McGarty: The biggest challenges for agents this year will be agents who haven’t adapted from the fast-food mentality of the COVID market to our current fine-dining market, where every detail matters. The agents who are actually closing deals are working harder than ever to help their buyers and sellers, not posting on social media.

What do you think needs to happen for the market to improve?

McGarty: It depends how you define “improve.” Improve as increased prices, increased volume, increased affordability? Either way, it’s a simple supply and demand problem. We’re short on supply, and demand is and always has been strong. The northwest, Seattle especially, is a place people want to live, plus we have a strong, diverse economy, and we’re the best climate hedge in the country. This is nothing new, in 1971 Oregon posted a sign that read, “Welcome to Oregon — Now Go Home.”

Improving will mean changing one of those variables. The natural demand is there. Lower mortgage rates will increase demand. We are constrained on supply due to accidental landlords and lack of places to build.

Manning: Most importantly, interest rates need to drop so that consumers can afford to invest in homes. Despite that, consumers should take a long-term view of their real estate needs rather than reacting to sensationalized news cycles or worrying about interest rates they cannot change. We know that homebuyers in the 1980s were faced with even higher interest rates than currently, and yet their homes have been among the biggest drivers of middle-class wealth for decades. Twenty years from now, it is likely that the length of home ownership will have impacted household wealth much more than the interest rate at the time of purchase.

Gardner: Mortgage rates need to drop significantly in order to entice sellers to list their homes (as they will likely be losing the historically low rates that they currently hold). Buyers and sellers are also wary of an economy which many are saying will enter a modest recession in 2024, coupled with the fact that we’re coming into an election year. I still see a proverbial hangover from the market high we experienced in 2021/2022, and it will take time for the market to adapt to the new reality of higher rates, as well as higher prices.

How can Seattle address its housing inventory shortage in 2024?

Gardner: It won’t! Although HB1110 was signed into law in May, it was a bill designed to increase middle housing in traditionally single-family neighborhoods, so we will still struggle from a lack of developable land on which to build. Jurisdictions in our region also need to look at how they can address onerous regulations and long permit timelines which create significant obstacles for builders, as they drive up costs and make housing even less affordable.

McGarty: It’s nearly impossible to address in 2024 as the home construction cycle is longer than a year, but what we can do is to continue to make it easier to build DADUs (detached accessory dwelling units) and lay the framework for how each city will implement House Bill 1110, the bill signed into law this year to increase middle housing in areas traditionally dedicated to single-family detached housing.

Manning: Although new construction activity has decreased, and fewer new homes are expected to come to market in 2024, we are seeing discussion of the concept of repurposing empty office buildings in the Seattle downtown area as residential housing. Despite significant structural considerations that would pose challenges, a redesign of downtown Seattle office buildings could create significant housing availability. For that to happen however, Seattle would need to completely transform its ultra-permissive approach to public safety to make downtown attractive enough to justify the investment by building owners.