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The correlation between housing demand and land sales is intricate, reflecting a delicate balance influenced by various factors. Bank Rate highlights key determinants such as home prices, mortgage rates, inventory levels, and commission structures, all of which collectively shape housing affordability. The recent unexpected rise in mortgage rates has cast a shadow over the spring home-buying season, diminishing the purchasing power of potential buyers and thereby dampening demand for homes, particularly existing ones. Consequently, existing home sales have stagnated, contrasting with the thriving market for newly built homes.
Interestingly, this stagnation in existing home sales has had a positive effect on U.S. housing supply. A decline in sales effectively increases the overall supply of available homes, albeit modestly. This trend bodes well for landowners, signaling potentially heightened demand for land to accommodate the need for new home construction.
Things are indeed looking upbeat in terms of land real estate, if a 2024 survey by National Land Realty serves as an indication. Nearly 64% of those polled expressed feeling either “somewhat optimistic” or “very optimistic” about the performance of the land sector for the balance of the year. This positive outlook reflects industry-wide confidence in the stability of land values across the country and the potential for further growth in 2024. Moreover, expectations of a slower increase in home prices throughout 2024 suggest market stabilization, potentially incentivizing more buyers to enter the market, particularly if interest rate hikes are mitigated. A stable market characterized by high demand and low inventory typically benefits landowners, as it implies sustained demand for land for development purposes.
Despite challenges in housing affordability arising from rising mortgage rates and home prices, forecasts anticipate an uptick in home sales transactions compared to previous years, underscoring the persistent demand for housing. Additionally, the influx of new apartment supplies, with a projected delivery of 440,000 units in 2024 and over 900,000 currently under construction, is expected to temper rent growth and improve affordability for renters, according to RealPage. This influx may also indirectly impact land sales, as it reflects shifts in demand across different segments of the real estate market.
While affordability challenges and inventory shortages persist, the forecasted increase in home sales and market stabilization indicate continued demand for both housing and land. Landowners can anticipate a stable yet competitive market in 2024, where the availability of properties for sale will continue to drive demand for land, albeit within a landscape shaped by evolving economic conditions and housing trends.
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