Featuring the perspectives of local brokerage executives:

Oleg Bortman
Co-Founder and Associate Broker, The Brokery

Sophia DePallo
Realtor and Team Leader, Retsy Real Estate

Matthew Gardner
Chief Economist, Windermere Real Estate

Greg Hague
Founder and CEO, 72SOLD

Patrick van den Bossche
President, Realty Executives International

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

Patrick van den Bossche: The market in 2024 will see-saw (up and down) in reaction to mortgage rates vacillating between high 7% to low 6%, which initiates the watershed for inventory levels and housing affordability.

Oleg Bortman: The interest rate environment has been a challenge in 2022/2023, however we expect rates to come down in the sixes by Q2 2024. This will bring many buyers back into the market. Also, with so much economic growth in Arizona, including the significant new semiconductor chip companies and battery manufacturers and the high paying jobs they bring with them, I predict growth of about 4-6% for 2024.

Greg Hague: Ultimately, it depends on what mortgage interest rates do. If they stabilize around 7%-7.5% consumers will get used to it (not like it), and buying activity will increase. If rates continue to fluctuate unpredictably, it is likely that buyers will stay on the sidelines. Fluctuation breeds uncertainty, and uncertainty tends to paralyze big decisions, particularly major purchase decisions. In other words, the movement of interest rates can have a greater impact on buyer demand than the actual rate itself.

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.

Sophia DePallo: My short answer is: Up, but challenging. With the recent news that the Fed will hold off on interest rate hikes, I am expecting rates to continue to trend in the opposite direction we saw for 2023. As the rate of inflation stabilizes and continues to decline, I expect that interest rates will also continue to decline. 

For this reason, I am expecting a positive start to 2024 for many buyers, especially those who are waiting for slightly more palatable interest rates. However, limited inventory presents a challenge, and I predict this may create a tighter market.

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

Bortman: Yes, I expect many segments of the residential market to see growth in 2024. The luxury market over $3 million has been almost bulletproof, because it isn’t impacted as much by interest rates. I believe the market under $1.5 million will start seeing a big bump in sales as interest rates get more stabilized and approach the 6% range. Areas where there is growing industry will also see a significant price increase in homes.

Hague: Single-family homes have the most underlying strength because that is where we have the most pent-up demand. Fast-rising interest rates sidelined a wealth of qualified buyers, so when rates become perceptually acceptable to those buyers, single-family home sales will surge.

Gardner: Single-family home 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.

DePallo: If we have approachable interest rates in 2024 (as predicted), developers will feel more confident to ramp up new construction, which is desperately needed in our market here in Arizona and nationwide. The luxury market will remain strong as it has for the last three to four years. I predict it will remain on a positive run.

Van den Bossche: The momentum of rising new construction in 2023 will continue into 2024 as a significant growth segment because that is a segment that can right size in response to housing affordability (in size and price), and it is an industry segment that has the ability to price into the home price a mortgage rate that is more palatable for qualified buyers. Rural markets will also see growth as home builders will eye that as a place to provide starter homes for the first home buyers.

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

Hague: 72SOLD was the Inc 5000 fastest-growing company in Arizona both this year and last. We were also ranked the No. 4 fastest-growing real estate firm in America for 2023. Regardless of market ups and downs, I predict our growth will lead Arizona and be among the top in the nation.

DePallo: We expect our business to thrive! As trusted real estate professionals, supported by RETSY | Forbes Global Properties and The SJ Collective, we will continue to provide our clients with the attention and market knowledge for a successful 2024.  

Van den Bossche: Realty Executives expects to thrive as the role of the real estate agent continues to lean more heavily toward the tenured and experienced brokerages, brokers and agents, which is the core of who we are. The real estate market will continue to grow in complexity which favors our tenured network of real estate professionals.

Bortman: Yes, at The Brokery we expect to pick up more seasoned agents for our boutique firm. We have found that having valuable resources like a full-time graphic designer and a director of operations for all our agents will continue to attract talented and seasoned agents who sell over $10 million annually. Our “relentlessly local” approach is a game changer.

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

DePallo: If we continue to experience our current rate of low inventory, this will result in fewer transactions for a great number of real estate professionals. It will be even more important for agents to remain experts in local inventory and market conditions. Educating clients, both buyers and sellers, is all the more critical to successful transactions. 

Bortman: The biggest challenge for agents will be running their real estate career as a true business. Those agents who have been flying high off of the pandemic market will be in trouble. Agents who have their hand out for leads from Zillow or other online companies will also have a challenging year. In contrast, the agents who have built a solid reputation and a local brand presence will come out on top.

Van den Bossche: Some of the challenges agents faced in 2023 (mortgage rates and inventory levels) will continue in 2024 but with the additional challenge of having to “up their game” in proving their value proposition for consumers (buyers and sellers). It will be tenured agents that are familiar with historic market conditions (where mortgage rates are at elevated levels, with general high inflation) that will be in a strong position to provide guidance for consumers.

Hague: The biggest challenge for real estate agents will unquestionably be the dramatic changes in our industry resulting from the recent Sitzer-Burnett federal court decision and a number of other pending cases like it across the country. The changes will occur quickly and force agents to be more creative in their business models, fee structures and offer unique value propositions to both buyers and sellers.

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

Van den Bossche: We need more new construction to relieve the pressure on the resale market. Currently all segments of the buyer pool (first time buyers, upsizing buyers, downsizing buyers, and relocation buyers) are fishing in the same pond — the resale housing market.

New construction came to a halt on the back end of the Great Recession and has grown at a trickle rate in the years thereafter. The COVID years provided the demand for new construction to accelerate, but their cadence was affected by the high-inflation impact on their building materials and labor, causing them to hedge their production levels.

This segment gaining confidence to balance supply and demand and not create risk exposure to their business will dramatically impact the market and help improve it. That, combined with a stabilization of mortgage rates in the 6%-ish range, will bolster buyers’ confidence and encourage existing homeowners to put their homes on the market. Currently, about 80% of mortgage holders reported having a rate of less than 5%, 90% reported having a rate of less than 6% and almost a third having a rate of less than 3%. In order for these low-rate mortgage holders to be convinced to sell, the mortgage rates will need to be in a range that starts with a six and show a level of stability.

Hague: Home-loan rates need to decline and then stabilize.

Bortman: Phoenix has been one of the top cities to live in and move to for the past seven years. A reduction in negative national news about Phoenix will improve the market and help this hot spot attract and retain more people.

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.

DePallo: To accommodate the healthy bank of buyers waiting for better overall market conditions allowing them to realize the goal of homeownership, our inventory needs to grow significantly, and it would be wonderful to see interest rates in the fives. Anything lower would have to accompany greater economic challenges, and we want everyone to win in 2024. 

What effect will extreme water shortages have on the Phoenix housing market?

Hague: The state, county and most affected cities are constantly watching, evaluating and taking action to address the water shortage situation. I’ve lived here since 1981 and have been impressed by how state and local leadership continues to navigate and solve water shortage issues. I am confident this will continue, and I sure hope so because I am not knowledgeable enough in this area to do anything but cross my fingers and depend on people smarter than me.

Van den Bossche: As we have seen by our neighbors in California, extreme water shortage conditions will certainly cause government regulations to come into play to manage the water supply. That said, we have the benefit of our housing market already taking on water conservation efforts. This includes home design (new construction and remodels) and a climate that is naturally well suited for xeriscape. Water concerns are another reason why our service as tenured, knowledgeable real estate professionals is key in helping consumers navigate the market.

Bortman: We do not have an extreme water shortage. We actually use less water now than we did in 1950. More of these national news scare tactics are exactly what I am talking about. The water shortage in Phoenix is not a concern for our market.