Featuring the perspectives of local brokerage executives:
Nancy Almodovar
President and CEO, Nan and Company Properties
Charles El-Moussa
Texas President, Coldwell Banker Realty
Matthew Gardner
Chief Economist, Windermere Real Estate
Catherine Lee
President, Douglas Elliman Texas
What do you expect for the overall housing market for 2024? Up, down or stable? Why?
Charles El-Moussa: We expect to see housing prices and sales increase slightly in 2024. Some industry experts are predicting interest rates to stabilize or even decrease by as much as a percentage point. Lower mortgage rates would help spur home-sales activity. If the mortgage rates do decline, this will also help with inventory issues. It would drive more sellers to put their homes on the market and help with the shortage of inventory we saw throughout 2023. Overall, 2024 will bring a more balanced market than what we have seen in the past four years.
Nancy Almodovar: Houston’s economy remains as one of the most robust in the country, and Texas overall ranks No. 11, as the best job markets in the U.S. Our housing market consistently reports signs of appreciation in the 6%-9% range, year over year. Through our relocation affiliate partners we are seeing buyers moving from New York, California and Florida for Houston jobs. I anticipate the second and third quarters of 2024 to see a slight dip in interest rates, which will cause a huge spike in sales.
I would say we are already seeing growth in the luxury market, and as we enter 2024, we will see that trend continue. Additionally, builders are also wanting to move existing inventory so you will notice the re-introduction of incentives being offered to clear out existing inventory and fund future development.
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.
Catherine Lee: Because many homeowners have mortgages with interest rates under 4%, many have a hard time justifying a move. I think transaction volume will improve in 2024 when interest rates hopefully begin to stabilize.
Do you think any segments of the residential market will see growth in 2024? (new construction, rural, luxury, etc.)
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.
Lee: I believe new construction will see increased growth because many resale homes are locked in at low interest rates for a long time. Developers have the ability to offer incentives, such as rate buy downs, that make new construction very competitive with resale homes.
El-Moussa: Luxury neighborhoods with homes priced at $1 million-plus will continue to be among the highest performing in the Houston real estate market. Such top markets are the Rice/Museum District with an average sales price of $1.1 million and a 25% increase in the number of 2023 transactions, followed by River Oaks, Tanglewood and Bellaire.
With Texas having among the highest number of new housing start permits in the country in 2023, with more than a quarter million, it’s no surprise Dallas and Houston now rank as the fourth- and fifth-largest metropolitan areas in the nation. Houston now has the second-highest number of Fortune 500 companies in the nation with 25 — second only to New York City — and this has helped fuel growth in employment, people relocating to the state and the overall greater Houston economy.
What growth, if any, do you expect for your company next year? Do you expect your business to thrive, decline or remain stable? Why?
Lee: Growth can come from multiple facets including transaction volume, pricing and agent recruitment. We see an opportunity in the current environment to leverage our brand and its national presence, along with our international partnership with Knight Frank, to drive growth from a market share standpoint.
Almodovar: We will continue to grow and thrive through the volatile market. We have found our niche in elasticity. Being robust and able to adapt when things are not working is a characteristic your company must have in excess in order to survive. Being nimble enough to ride the J-curve like a wave instead of a chore.
What will be the biggest challenges for agents in 2024? How can they overcome these challenges?
Almodovar: Identifying the value proposition that best serves clients moving forward so that their business may change from “hunting for business” to “hunted for your business.”
El-Moussa: Agents will need to differentiate themselves from competing agents in their markets by clearly demonstrating their value proposition and depth of local real estate market knowledge to prospective clients. Those with an extensive marketing plan and regular outreach to perspective and past clients will fare the best in 2024. Educating clients about the realities of the market, what a half percentage point rise or dip in the interest rate means for them, the various loan programs and interest-rate buy down programs available, and how to buy in a market with low inventory will go a long way toward succeeding in 2024.
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.
Lee: In Houston, transaction volume is currently down. I am encouraging our agents to make detailed business plans and lean into Elliman’s network and resources to maintain a competitive advantage.
What do you think needs to happen for the market to improve?
Lee: In order for transaction volume to grow, I think that either interest rates need to decrease or home costs need to come down to account for the increased rates.
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.
El-Moussa: The two biggest areas that will assist the Houston market — and really every regional market in the U.S. — is a decrease in the mortgage interest rate and having more inventory available to sell.
Almodovar: Rates to stabilize and show a plateau.
Which Houston neighborhoods, suburbs or master-planned communities are on the rise and have the brightest housing outlook in 2024?
El-Moussa: Several markets continue to lead the way in greater Houston, including the Lake Conroe area, which saw more home purchases than any other area suburban community in 2023; Cypress South, Katy and Old Town Katy; Spring; and The Woodlands. These areas continue to be in big demand and are seeing additional construction to try to keep pace with demand.
Lee: I believe we will see increased population growth in the north and southwest areas of Houston. Hines recently announced the purchase of 528 acres for a 1,400-home community near Waller, and the Texas Medical Center is adding another phase, TMC BioPort. Additionally, EaDo is getting a 10-block mixed-use district. The Woodlands also continues to be a popular place for people looking for great schools and attractive housing options.