Year end data is in for the Omaha real estate market.
While many homebuyers and sellers were stuck on the sidelines facing an affordability crisis last year, we are seeing some trends that give us cautious optimisim as we look ahead into 2024.
My name is Brian Carlin. I’ve been selling homes over 20 years with Nebraska Realty and a bit of stats geek. If you were a home buyer or seller stuck on the fence about making a move, let’s take a look at the most current housing data to see what we can expect in the year ahead.
Will this be the year we turn the corner and see more homes on the market? Could mortgage rates return to 6 percent mabye 5? And will home values continue to climb with double digit appreciate rates? A deep dive into the data will help us answer those questions and more.
2023 Housing Issues
Without a doubt, there were three significant housing issues that grabbed the headlines last year. The first was rising interest rates. The second was that nobody wanted to sell their home. The last was the persistent high home values.
Let’s look at inventory levels first. Will sellers finally loosen up and put more homes on the market?
Home Inventory Predictions and Pitfalls
Omaha Homes for Sale Monthly Increase Chart January 2024The chart above shows the month-over-month number of active homes in the Omaha real estate market (Douglas and Sarpy counties).
While inventory levels remain at historic lows throughout much of the country, Omaha saw over a 14% increase in homes on the market from this time last year AND a 52% increase from the rock bottom in Dec 2021.
Nationally there was an increase in inventory as well but this increase was only about 5%. Omaha is very close to pre pandemic numbers of homes on the market compared to the rest of the country that remains around 30% less inventory.
There is a clear trend of slow but steady increases in inventory. Sellers are slowly coming back into the market. Homebuyers should have slightly more options this spring.
Why are there no homes on the market?
That begs the question, why is most of the country at or near historic lows in the first place? This isn’t a big mystery. Mortgage interest rates of course.
According to Redfin, over 88% of U.S. homeowners with mortgages have an interest rate below 6%, nearly 60% have rates below 4%, this is prompting many to stay put instead of selling and buying a home at a higher rate—a phenomenon called the “lock-in effect.”
That’s not only common sense, but also gives us some insight for the reasons behind the positive trend in inventory. The answer is two fold.
1. As time progresses an increasing number of homeowners will lose those their locks on lower mortgage rates and be encouraged to sell.
2. Secondly, many homeowners now see a 6 percent mortgage rate as the new 4. After nearly 2 years steady increases in the federal funds rate, the recent stabilization of rates through the Fall has triggered feelings of a new normal. Much the same as increasing interest rates slow growth, steady rates will have a positive impact on activity. And this increase in activity is an early sign of the new reality.
Has the recent stabilization of mortgage interest rates, also encouraged home buying?
And in fact it has. As we see in this second chart, there was a 15% increase in the number of pendings (soon to be closed ) transactions last December compared to the year before. Nationally, this increase was 2.4%.
All indications are pointing towards more homes on the market and more transactions in 2024.
On a national level, that increase is estimated to be around 5% while I bet Omaha doubles that.
So if both supply and demand of homes are climbing together what is happening to home sale prices?
You can see in our final chart, that the median price of home sales in Douglas and Sarpy Counties was up over 5% from the year before and now sits at $310,000.
Nationally, sale values rose around 3%.
If you’re one of the millions of would be homebuyers that have been priced out of the market in what we are calling the home affordability crisis, unfortunately all indications are pointed towards a continued increase in home sale values. There is no data to suggest home values will return to what once was.
The good news is home values are expected to increase at a much lower pace than in the recent past.
What can we expect in the Omaha real estate market in 2024?
All current trends indicate we have more than enough homebuyers at current mortgage rates and current home prices to keep the activity happening.
The rising inventory levels are slightly outpacing the increase in demand.
And, the upward pressure on home prices has receded which will help encourage home sale activity this spring.
As for mortgage rates, I don’t think the Federal Reserve Board will decrease benchmarket rates in 2024 as fast as some are forecasting. I am predicting they will lower rates 2 maybe three times.
But, remember that mortgage rates are not tied directly to the fed rate. I expect mortgages to decrease and settle in the mid 6’s this sumer which is good. If they were to fall too much and too quickly, demand could easily overtake supply and we will be back into a summer of bidding wars.
The big question remains, should you move now or wait?
While cheaper mortgage rates help payment affordability, I’m also expecting competition to pick up through this summer.
But don’t forget, this is also an election year and election years always have an impact on the housing market. Wait, you didn’t know that?
If this is news to you, you should follow and subscribe to my youtube page so you can stay ahead of the curve in 2024.