March 2024 Real Estate Market Overview

The real estate market is seeing two very different trends coming to a head at the same time, with very different results. On the one hand, the residential real estate market is continuing to be squeezed by a lack of available inventory, which has only gotten worse as housing demand rises. On the other hand, the commercial real estate market is facing significant trouble due to an overabundance of available office space that its owners do not want and no one seems to want to buy. In both cases, it seems as though problems may be coming to a head just as the spring housing rush has arrived.

Lack of Inventory Keeps Prices High

The amount of available housing inventory has been kept comparably low since just after the COVID pandemic, and the market has yet to recover. As a result, housing prices remain high, with multiple bidders tending to compete for every available home. This has kept some buyers priced out of the market, even with interest rates down slightly from their peak in late 2023, sitting at 6.88% in the first week of March, about a point down from late November.

Consumers Rush to Buy Housing Where Available

Despite this lack of inventory, the number of people seeking new homes has increased, due in part to the arrival of the spring. The warmer weather tends to come with renewed interest in a new home, and this year was no exception, seeing mortgage demand spike by 11% in the first week of March. This, in turn, has boosted housing prices even higher, which is good for sellers but a potential issue for buyers competing over the limited available inventory.

Commercial Real Estate Faces Reckoning

The commercial real estate market, meanwhile, is seeing a long-term crisis beginning to manifest. With many commercial mortgages starting to come due from the pre-pandemic period, borrowers are seeking to either refinance their mortgages or offload buildings they no longer want or have use for. Unfortunately, there are not many buyers for these properties, leaving commercial real estate owners in a bind.

Commercial Debt Continues to Be an Issue

In particular, the issue of commercial real estate debt continues to be an ongoing problem, and one that is likely to last for at least the next year. This is because many commercial mortgages are “interest only” loans, meaning that borrowers only pay off the interest for the duration of the mortgage, and pay off the principal when the loan matures. As many commercial mortgages reach maturity, debtors must either find a way to pay off the loans on these properties, or else find someone else willing to buy the properties off them, often for less than they borrowed to buy the properties in the first place.