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Dec 29, 2023

Real Estate Hindsight is 2020 … Not 2024

Daniel Moskowitz

Photography By

Special to CH2/CB2 Magazine
I struggle to believe it has been nearly four years since we all learned just how much people valued their toilet paper.

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Ha! Get it?  

Well, the extent to which that title rubbed you in the right or wrong way probably tells you a lot about yourself as well as your real estate acquisition or improvement timing. Now, before we get going down a Freudian-like journey of behavioral self-assessment of our subconscious, I would like to extend a very Happy New Year and welcome you to the next magnificent year in the best part of the South Carolina Lowcountry. Cheers to 2024!

As we attempt to foretell the real estate forecast for 2024, you will find that a psychotherapeutic examination of our response mechanism, influenced by the forces of our conscious and subconscious, might just be the answer to real estate in 2024. Note, I never read any of Freud’s books and that’s as deep as we will go, but we will not ignore the forces that drive our decisions. After all, it is how we respond to these forces that drives our satisfaction and quality of life. So, if you are hoping to develop or enhance self-satisfaction in 2024 concerning your Lowcountry real estate ownership, buckle up.

Before we recognize what history foretells for 2024, I’d like to rewind and look at real estate availability in our Lowcountry market, as well as the buying power of consumers, in 2020. As a frame of reference, Google Trends shares that the top three news topics in 2020 were election results, coronavirus, and stimulus checks. The missing ingredients outside of these top three topics that made 2020 such an influential year for real estate in the Lowcountry were 30-year fixed rates in the high two’s, access to contractors along with building supplies, inventory levels during the first half characterized as a buyer’s market, and of course the quarantine shockwave that recalibrated our valuation for quality of life. 

The icing on our 2020 real estate cake was time–the time we had never had before to stop, think, and subsequently shop. Never underestimate the value of this “icing.”

Fast forward over the subsequent three plus years and let’s reflect. I struggle to believe it has been nearly four years since we all learned just how much people valued their toilet paper. In the early months of Covid, the world economy looked grim, seemingly moments before the U.S. markets exploded. 

For real estate, it was the likes of the 2005 seller’s market we once believed we would not see again in a lifetime. This time it came back on steroids. Consumer spending struggled to be constrained as stimulus packages boosted the accessibility of funds and interest rates, with the 30-year fixed at an all-time low, amplified purchasing power. Real estate values soared as our inventory became so constrained. 

As the quality-of -life metric amplified in our lives, the appeal of our Lowcountry real estate market was vastly expanded. Consumers came from locales of great wealth. As broker-in-charge of the local brokerage Dunes Real Estate, I witnessed our ratio of cash buyers go from a normal one in four purchasers to nearly two out of three almost overnight. As of December 2023, financing has returned to a more normal market share along with loan to value metrics. Today’s area real estate consumers characterize inventory options as either scarce, overpriced, or needing too much work. Prices across the market are overall stable, with more of them still showing signs of improvement. Will that sustain in 2024, yes or no?  

How did you vote? Better yet, how will you vote in 2024? Only joking … my voting rhetoric is purely intended to carry the story. My only interest in knowing about your candidate for 2024 is that you choose to actually get out and place your vote. 

Election years are perhaps more relevant for real estate than one might think. When it comes to timing, many real estate professionals will share that most of our consumers trying to perfectly time their real estate decisions will ultimately rely upon a hunch. I tend to rely on historical facts more often than feelings when it comes to evaluating and will never tell you what to do; however, I will always be open to advising by way of sharing my facts. 

Presidential election years often bring a wave of uncertainty in many sectors. Interestingly, in the Hilton Head Island and Bluffton real estate market, they’ve historically marked an increase in activity. Despite common perceptions, four of the past five election years have seen a notable rise in real estate transactions compared to their preceding years. 

According to my calculations leveraging our local REsides Inc. data, transaction levels against their prior year increased 33.5% in 2004, decreased 22.2% in 2008, increased 18.1% in 2012, up again 2.1% in 2016, and finally 2020 delivered an impressive 23.6% increase.

Not surprising, many homeowners and potential buyers express a tendency to postpone real estate decisions until after the elections, citing potential shifts in policies affecting aspects like interest deductions and capital gains taxes. While I do recognize these concerns as valid, I also classify the choice for stagnation being more of the comfort we get from decisions made using the aforementioned “hunch.” The reason for this is because we also happen to see an inordinate boost in activity oriented around that fear-of-loss motivator. 

In life, we tend to be exceptional at fear-based decisions and approach them with the old “fight or flight” mentality. In the case of real estate, selling a home may be perceived as both. Motivated for the fight of wealth preservation, you take action with your metaphorical flight from a real estate market and sell your property. The counterpart to selling is buying. Real estate purchasers will similarly encounter the same paradox where fight and flight can mean the same action. 

One great example is the investor believing the next government regime will diminish the benefit of tax-deferred exchanges. From one perspective, they choose to fight by selling their current property and buying a like property of greater value to leverage the tax benefit. Another investor might hedge this same risk with flight from real estate, choosing to take the capital gains hit while it is perceived to be lesser. My point is, there is so much on the plate in a presidential election year, it has a tendency to induce action.

Broader economic concerns, such as cost of living adjustments, also play a significant role in these anticipatory real estate buy-or-sell decisions. A retrospective look reveals that delaying real estate investments based on election outcomes often doesn’t yield the expected advantages. Each election cycle is unique, with its own set of candidates and possible outcomes, yet the core real estate market dynamics appear to remain relatively consistent.

So, let’s unload on 2024 and determine what is likely to happen in real estate. 

On the fundamentals, there is a little more inventory than at this same time last year. Interest rates are currently showing evidence of decline, which increases buying power for purchasers. This will cause homeowners to at least begin thinking more about moving to a more desirable home versus feeling constrained by the comfort of their current low rate. 

On the greater macroeconomic influences, we continue to experience a second war of even larger potential consequences to our world. One clear economic indicator of consumer sentiment is the stock market reaching an all-time high in December. 

Lastly, we anticipate the media and the use of artificial intelligence in campaign ads will do their best to inspire a fear mechanism and engage all of us. Stop, pause, and think.

If you recall my earlier reference to Freud, please consider the way the words of the prior paragraph impacted you both subconsciously and consciously. If you were moved in some manner, then I suspect you are like most people and will recognize there is more to inspire real estate activity in our market in 2024 than in prior years. Only time will tell if history repeats itself. 

In any outcome, my hope for all readers of this article for the year ahead is that you choose to never underestimate the value of the “icing.” I hope that prior to determining your next real estate decision, you choose to take the time to stop, think, and embrace the time we have to enjoy our wonderful Lowcountry and all of its people. 

Happy New Year!  

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