2024 Marin Real Estate Outlook

December 31, 2023

2024 will see increasing activity in Marin Real Estate

with more competitive bidding on the most appealing properties

2023 was an unusual year for Real Estate in Marin, as it was nationwide. Mortgage rates hit a 20 year high at over 8%, and after years of price rises affordability hit an all time low. Meanwhile listings were at the lowest level since 1993 as homeowners were reluctant to give up their low rate mortgages. With fewer buyers and fewer sellers prices remained fairly steady, with the Case Schiller index indicating prices ticking up nationally towards the end of the year after moderate and short lived declines in late 2022.

In Marin in 2023 we saw an unusual number of price reductions, cancelled contracts and properties that sold under asking or not at all. "What a weird market" was the frequent refrain amongst Realtors. This is unlikely to persist in 2024 and we're likely to see a return to a more "normal" market, with properties selling quicker and for closer to asking price. This will occur as a result of falling rates but also as rate shock fades and market participants become used to the new reality.

Mortgage Rates Drop for the 9th Week in a Row

It all depends on the Fed

During their final meeting of the year earlier in December, central bank policymakers signaled that a nearly two-year battle against inflation is finally coming to an end in a long-awaited policy pivot. In addition to holding rates steady for the third straight month, Fed officials forecast a series of interest rate cuts in 2024 as inflation falls faster than expected.

While the central bank does not set the interest rates that borrowers pay on mortgages directly, its actions influence them. Mortgage rates track the yield on 10-year US Treasuries, which move up or down based on anticipation about the Fed’s actions, the Fed’s policy changes and investors’ reactions to them.

So the recent drops in Mortgage Rates are in anticipation of Fed rate cuts, and while most informed commentators expect Mortgage rates to continue to decline in 2024 and 2025, this expectation is predicated on the Fed following through on its forecast cuts. Any surprises - most obviously a resurgence of inflation, could cause a change(,) of course.

Still look high?

Could be worse!

A "soft landing" for Real Estate

You may have heard that the goal of the Fed is a "soft landing" for the economy. Cooling inflation by raising interest rates, but lowering them soon enough not so as to avoid a recession. There is growing optimism among forecasters that they be achieving this goal, as employment and economic growth have remained robust despite the higher rates.

Meanwhile it seems there might have been a soft landing for the real estate market as well. There has been a long-standing assumption among investors that home values move inversely to mortgage rates, but while prices softened marginally as rates rocketed in Spring 2022, this correlation was largely in absent during this cycle suggesting there is sufficient demand to push prices higher as rates decline.

There is a counter argument that the lower rates go more homeowners wanting to move will decide the time is right list their homes. This increase in "inventory" may be sufficient to lead to price declines as buyers find they have the upper hand.

Most likely we'll see a balance underpinning prices, with neither large drops or rises in prices.

Marin is different

Marin County has more land set aside for preservation than any other Bay area county with around 80% of the land undeveloped making it like living in between a world class city and a national park. No wonder so many people want to live here, and so few want to leave!

Consequently, it's likely the reduction in interest rates will encourage more buyers than sellers in our county. This will signify a return to a more normal market for Marin where prime properties that are prepared well and priced appropriately will attract multiple buyers trying to submit the most attractive offer.

The one enduring change we're likely to see is the preference of buyers for move in ready homes. While it's never been cheap to build or remodel in Marin, the increase in the cost of materials and labor increased the appeal of homes that homes that don't need much work. Consequently fixers will be less in demand and may be great value for DIY buyers.

In Summary

The Marin remains a highly attractive place to live.
The tech industry will continue to generate significant wealth in the Bay Area.
Inventory will increase slightly as interest rates decline.
But this will also bring more buyers into the market.
Distressed properties or those in less popular areas may take longer to sell but move in ready homes in sought after areas will attract competitions and multiple offers.
Professional preparation and marketing will remain essential in Marin's highly refined market (Check out our marketing presentation here Ross Valley Real Estate Marketing Suite )
Buyer's with experienced and knowledgeable representation will be more successful in their quest to own a home in Marin.
In the long term owning a home is a solid investment, and the best path for most Americans to build wealth.
Overall prices are likely to stay stable in 2024 rising in 2025 if rates continue to decline as currently expected. (But expect the unexpected!).