Lock In vs. Lock Out: The 2024 Real Estate Market

2024 has been a very unusual year in the new home real estate industry.

From our position as industry experts navigating traffic, leads and sales with our clients, we have experienced a decent, consistent level of sales throughout the year, with a declining volume of traffic and leads.

So, what’s going on?

Like any complex system, it’s a combination of factors. And the two leading contenders are the lock-in and the lock-out effects.

The Lock-in Effect:

According to Redfin, 82.4% of homeowners are locked in at rates below 5%, and 62% have rates under 4%. Moreover, 23.5% of homeowners have mortgage rates below 3%, one of the highest percentages on record.

These people aren’t moving unless they have to. Why would they have to? Life changes: new job, job loss, marriage, divorce, new kids, boomerang kids, parents moving in, etc…

In addition to these factors, getting a new job these days doesn’t necessarily mean you have to move. Work-from-home has changed that equation which has a less understood impact on home ownership.

The Lock-out Effect:

In a word — Affordability.

NAHB has updated its housing affordability graph for 2024, and the latest data show that 66.6 million households, 49% out of a total of 134.9 million, are unable to afford a $250,000 home.

As of the second quarter of 2024, the median home sales price in the United States was $412,300.

Between 82% of existing homeowners being locked-in to their current home and 49% of the US adult population not being able to afford to buy a home at all, there’s not a lot of home buyer market period.

The Silver Lining:

The silver lining is the weak resale market. Resales historically represent 9 out of every 10 homes sold in the US (90%!). Today, in many markets, that dominance has not only shrunk to 7 out of 10 (still a significant percentage), but those resales are typically over-priced (falling into the lock-out unaffordable equation) and are just old. Requiring additional investment in terms of renovations.

Combine that with the incentives offered by new home builders in terms of rate buy-downs, closing assistance and/or design upgrades and new home construction offers a much better option for today’s homebuyer, despite their lower overall numbers.

At AdsIntelligence Marketing, we’re always strategizing ways to maximize our client’s opportunities to get more than their fair share of the market.

Yes, it’s harder today than years past. Understanding why helps us formulate solutions that drive results. Ask us how?