Realtors see rebound for housing market in 2024, spurred by lower interest rates

Western Pennsylvania’s housing market took a hit last year that real estate agents attributed to higher mortgage rates that priced some buyers out of the market and fewer homes being available for those ready to make a move.

“All the companies were down about 13¹⁄₂%,” said Dennis A. Cestra Jr., president of Howard Hanna Real Estate Services in Pennsylvania, West Virginia and Maryland.

John Petrack, executive vice president of the Realtors Association of Metropolitan Pittsburgh, with Realtor members in six Southwestern Pennsylvania counties, pegged the drop-off last year at closer to 15%.

Home sales in 16 Western Pennsylvania counties, from Erie to Greene, and east to Somerset, fell to just over 26,000 last year from about 29,600 in 2022, according to data from West Penn Multi List Inc., a McCandless-based real estate services organization.

Whatever the percentage decrease, the housing industry was hurt by the increase in interest rates for a 30-year mortgage.

That reduced the affordability of homes, and there was a lack of inventory for those who wanted to buy homes, said Chris Murphy, West Penn Multi List’s president.

The higher interest rates — which the federally chartered Freddie Mac said reached an average of 7.79% in late October — likely forced some to purchase a house that was significantly different than the one they wanted, Murphy said.

For those whose homes were on the market last year, the price they got was up about 1% from 2022, Cestra said. The market was “highly competitive” last year for homes priced between $150,000 and $500,000, he said.

The average sale price as tracked by West Penn Multi List was $288,000 last year, up $15,000 from 2022.

Those looking to buy despite the rise in interest rates found that there were about 11% fewer homes listed for sale through the multi-list last year. There were just under 32,000 homes with for sale signs in the yard last year, compared to a little over 35,400 in 2022, according to West Penn Multi List.

A week into the new year, some in the region’s real estate industry offer some slightly different views on what’s in store for the next 51 weeks.

Cestra is not anticipating a boom year for the housing market.

“We’re going to be pretty flat, maybe 1 or 2 points higher,” Cestra said.

Petrack, however, sees the housing market becoming better this year.

“We’re probably looking at a much better year for the residential market,” Petrack said.

He attributes a brighter future for the housing market to pent-up demand for housing coupled with a drop in interest rates from 2023.

Interest rates that were close to 8% for some of 2023 fell to an average of 6.61% at the beginning of the year, based on data from Freddie Mac, which buys mortgages in the secondary market.

Those rates are forecast to decline steadily to 6.1% and then 5.5% by the fourth quarter of this year, according to the Mortgage Bankers Association, a Washington, D.C.-based trade organization.

If the Federal Reserve quickly makes a couple of significant reductions in the federal funds rate and lenders follow suit, “it will be like a starter pistol going off for the real estate market,” said Mark Twentier, who saw sales from the two Howard Hanna offices he manages in New Kensington and Allegheny Township increase in 2023 over 2022.

A significant drop in interest rates likely will trigger a rise in home prices and possibly a return to the environment of 2022, when there would be multiple offers on a house, said Twentier, who has been in the real estate business for 34 years.

The last two quarters were better for sales, said Murphy, who is the broker-owner of RE/Max Realty in Cranberry Township. He anticipates that bodes well for 2024 after the first two quarters.

With the presidential election in November, Murphy said he believes politics will play a factor in the lowering of the rates.

“We’ll see 5%,” Murphy predicted. Furthermore, he believes that lenders will make it easier for home buyers to afford new homes, offering them various reductions of the expense of acquiring a mortgage.

And that anticipated lowering of interest rates will cause more homes to go on the market, an increase in buying and “a huge influx of new buyers.”

“We’ll see a boom by the end of the year,” Murphy said.

Housing inventory down

The lack of available housing that is on the market — the inventory — compared to the number of prospective buyers, contributed to the down year in 2023, real estate agents said.

There’s only a three-month inventory of existing homes on the market, when a four-month supply is considered healthy, Petrack said.

The supply of houses that were available for sale at times last year could be exhausted in about two months and one week by all of those looking to buy houses, Howard Hanna’s Cestra said. The ideal healthy housing market has about a six-month supply, Cestra said.

“We’ve needed more housing for the last six years,” Cestra said.

One of the reasons for the lack of inventory is that people are keeping their homes longer.

“The average length of ownership used to be seven to eight years; now it is up to 11 years,” Petrak said. Part of the reason may be the demographics of the region, which has an older population.

The lack of inventory is tied to the rise in interest rates, according to Donna Tidwell, a Realtor for Berkshire Hathaway Home Services in Ligonier.

With interest rates close to 7% and many homeowners holding a mortgage with a rate of 2% or 3%, prospective sellers “can’t afford to move” to another house.

“The sellers are kind of married to their house,” said Tidwell, who has been in the real estate business for 40 years.

If mortgage rates do drop, Tidwell said, the market will open up because of the pent-up demand and prospective buyers who are tired of waiting.

“The buyers are out there,” said Tidwell, who said she sold fewer homes in 2023 than in 2022 but for a higher dollar amount.

New house construction to expand the inventory of available residences rose in Southwestern Pennsylvania by 30% over 2022, Petrack said.

“It’s pretty much booming, and prices have risen over 4% over 2022,” Petrack said.

Even though builders are taking advantage of the demand for new homes, the level of new construction in the region still has not recoveredsince the deep recession of 2008 and 2009, Petrack said.

Even if interest rates drop as some analysts are predicting, there “still are issues with available land and buildable sites,” along with the ongoing challenges of getting materials because of supply chain problems, said James Eichenlaub, executive director of the Builders Association of Metropolitan Pittsburgh.

“There is a historic backlog for houses,” especially in single-family homes, Eichenlaub said.