CHATTANOOGA REAL ESTATE MARKET PREDICTIONS FOR 2024: Part 1

Have you found the past year’s housing market difficult to navigate? Countless details leaving you & your big decisions paralyzed? We know what that feels like. Let us simplify the data for you. Here’s a summary of how we got to the point we’re at and what to expect for the year ahead.

First, we rewind to 2020, the year in which the seeds of our current market conditions were planted.

WHAT’S HAPPENED SO FAR?

Too much cheap cash: In a bid to bolster the economy in the face of COVID-19, the government injected a staggering $10.32 trillion into the economy, taking deficit spending to unprecedented heights. Next, the Federal Reserve kept interest rates artificially low to stimulate investment, thereby making money excessively cheap to borrow.
Labor shortages: This increased investment rapidly expanded the number of jobs available, while at the same time, the pool of workers willing and able to fill these jobs began to shrink. The result was rapid wage inflation as employers offered more money to compete in this tightening job market.
Supply chain shortages: Battling a global pandemic, worldwide economies came to a grinding halt for the first time in modern history. Between a series of lockdowns, new strains of COVID-19, millions of sick workers, and the aforementioned labor shortages, global production sputtered in fits and starts. Meanwhile, buoyed by government stimulus, demand for goods and services ballooned far beyond the industry’s capacity to meet, leading to years of crippling supply chain shortages.
The net result: In 2021, inflation jumped dramatically to levels not seen in thirty years. By 2022, inflation had soared alarmingly, as high as 9.1% in June 2022.
The Federal Reserve’s response: On March 16th, 2022, in a delayed response, the Fed began a series of aggressive rate hikes designed to curb inflation.

WHAT DID THIS MEAN FOR 2023?

Soaring mortgage rates: Rates ballooned to 8%, their highest levels in over 20 years.
Declining home sales: Consequently, national home sales fell 18.3% year over year while Chattanooga home sales fared a little better, dropping 12.5% from 11,618 in 2022 to 10,163 in 2023.
Elevated home prices: Conversely, prices remained high despite fewer sales, with Chattanooga’s median sales price climbing 3.4% from $304,713 in 2022 to $315,000 in 2023.
Slowing rent growth: Meanwhile, increased vacancy rates slowed national rent appreciation with median asking rent stabilizing at $1,967 – a number that remains 22.1% higher than pre-pandemic levels and a mere $84 lower than the median mortgage payment of $2.051 making the case for homeownership clear-cut.
Limited home supply: It was challenging for buyers to find property amidst a prolonged Seller’s market. Indeed, Chattanooga ended the year at a meager 2.4 months supply with only 2,044 homes on the market (compared to 2.2 months and 2,027 homes in 2022).
Continued bidding wars: This led to buyers competing in bidding wars 51.6% of the time.
Increased negotiation: Thankfully, buyers were able to offset these challenges with a little more negotiating room: Chattanooga sellers came off their original asking price an average of 3.2% (compared to 1.8% in 2022).
Affordability crisis: For the first time in history, Chattanooga’s affordability index dropped well below 100 in 2022. The trend continued in 2023, making the dream of homeownership elusive for some and difficult for many.

WHAT CAN WE EXPECT FOR THE YEAR AHEAD?

Declining inflation: The Fed’s monetary policy is succeeding, driving inflation from a high of 9.1% down to 3.2% in February 2024. Analysts expect this patient, downward pressure to continue as the central bank targets its long-term official rate of 2%.
Soft economic growth: There is widely-held consensus that the US economy is on solid footing, heading for a soft landing with little to no evidence for a recession in 2024.
30-yr Mortgage rates to fall: As inflation declines, the Fed will begin to slowly cut rates – a strong tailwind for the housing market. Current predictions hover around 6% by Q4.
Increased new construction: Single-family homebuilding is on the rise, opening more options for buyers. Multi-family construction, on the other hand, will decline.
Seller’s Market to persist: While more new construction and resale listings are expected, it won’t be sufficient to balance the market as demand continues to outstrip supply.
Stable, then rising home prices: Persistent demand will combine with low inventory to buoy values. Home prices will trend with interest rates: stable through the majority of 2024, then rising as interest rates fall.
Affordability to remain a challenge: Lower rates may help, but affordability will remain well below pre-pandemic levels.

In summary, all indicators point to the market entering 2024 on solid footing, suggesting neither recession nor overheating but sustained stability in the months ahead. High interest rates are acting like a much needed tether to home prices, keeping them from soaring in the face of strong economic tailwinds. When the Fed cuts rates this tether will be cut, releasing home prices to climb.

Don’t wait. Grab hold – before the tether is cut and Chattanooga real estate balloons again.

Want to hear more of this data and details? Check out the latest video from our Youtube channel.

Keep your eyes out for our full Market Report with more data and details. Coming soon – Part 2 of this blog: what this means to you!

If you’d like someone to join you in the journey, please reach out to our team. We’re ready to build all of this information into practical plans with you.