Bay Area Real Estate Trends to Look Out for in 2024

Savvy buyers who braved the 2023 real estate market may be wary of optimism as we welcome 2024. But if recent trends indicate what’s to come, that positive outlook may be warranted.

Last year, they challenged aspiring homeowners with limited inventory, high mortgage rates, and resilient prices, often resulting in bidding wars. The Federal Reserve’s monetary policy played no small part in how the real estate market reacted to the economic landscape. But as the Fed is widely expected to relax its restrictive stance in 2024, buyers may look forward to a more welcoming Bay Area housing market.

Economists forecast lower mortgage rates.

For most of 2022 and 2023, homebuyers witnessed soaring mortgage rates that reached as high as eight percent for a 30-year fixed-rate loan, primarily driven by interest rate hikes by the Federal Reserve as it battled high inflation.

However, following a mid-December policy meeting in 2023, Fed Chairman Jerome Powell shared that Federal Open Market Committee (FOMC) projections may be reason enough to expect potential interest rate cuts in 2024.

Evidence in recent months already shows that mortgage rates are starting to drop slightly, giving buyers a chance to re-enter the Bay Area housing market with more purchasing power and prospects of lower monthly payments.

Commission rebates help buyers with affordability.

Real estate commissions have recently taken center stage due to a landmark ruling by a Missouri court against the National Association of Realtors and other brokerages for past practices regarding this form of compensation.

While there is a high probability that the ruling may be appealed and tied up in legal appeals for some time, the silver lining is a clearer understanding of buyer commission structures and just how valuable a commission rebate can be.

A commission rebate is a portion of a buyer’s agent’s commission fee returned to the buyer after a successful closing.

Homebuyers save thousands of dollars when purchasing pricey Bay Area properties by working with a brokerage that provides commission rebates. For instance, if you buy a Fremont condo for $1.8 million through Prevu, you can receive a rebate totaling up to one and a half percent cash back, or $27,000, via the company’s Smart Buyer Rebate.

Inventory is more likely to improve.

The story of fewer homes for sale in 2023 generally centered on the concept of “trapped inventory.”

High mortgage rates created unfavorable conditions for homeowners to sell their properties, previously financed with low mortgage rates, only to face steep monthly mortgage costs on their next home purchase.

Interest rates have started to show signs of cooling over the past three months, potentially creating a more enticing market for sellers. While prices may remain competitive for the foreseeable future, an uptick in new inventory can be a boon for buyers that can tip the scales in their favor.

New construction creates more options for buyers.

Though it may make sense to expect a rise in inventory for buyers to explore, it likely won’t be solely single-family homes that help bolster listings.

New construction condos and townhouse developments have slowly become a viable option for many buyers priced out of expensive single-family houses.

Many of these new construction projects come with potentially favorable financing options for buyers, such as rate buydowns. This, coupled with an influx of new supply for interested Bay Area buyers to explore, can help alleviate the inventory strain plaguing the real estate market for the past couple of years.

Return to the office means different buyer priorities

The work-from-home era created a demand for spacious homes that could serve as home offices. Buyers began trading commute times and central locations for more square footage and spacious floor plans.

As more workers return to the office, these priorities change and influence the market demand.

Commute times are becoming front and center again regarding homebuyers’ needs. This may mean that demand for large homes in the suburbs will cool off, potentially freeing up more inventory. Buyers should also be ready for more demand in condos and houses close to office spaces and financial centers, which can impact price points in those areas.