The housing market has got off to a stronger start than many expected over the first two months of the year. Reports of mortgage rates reaching 4% or lower have attracted home movers back into the market after many put decisions on hold over the second half of 2023.
Agents and builders should expect improved sales agreed in 2024. We may well reach 1.1m sales in 2024 if current trends continue over the rest of the year. This would be 10% higher than the 1m sales recorded over 2023, supporting revenue growth for agents and sales rates for builders.
It’s important everyone keeps their feet on the ground, however. Inflation is not yet defeated and mortgage rates are unlikely to move much lower over 2024. Our data shows buyers remain price sensitive and sellers continue to trim asking prices back in order to attract demand for their homes.
Sales agreed 16% higher year on year
While much of the media focus is on the direction of house prices what really matters to agents and builders are volumes and the number of sales.
New sales agreed, sold subject to contract, are running 16% higher than a year ago. Sales are up across all regions and countries of the UK led by London and the South East where higher mortgage rates hit activity levels last year more than other areas.
The narrative and sentiment on house prices is important for stimulating more vendors as what they might get for their home unlocks their next move. Confidence they can list a home and get interest is a key motivating factor that will bring more valuation opportunities and more inventory to sell.
Vendors coming to the market at fastest rate for four years
We are recording a strong rebound in new sellers coming to the market. The flow of new listings for sale is the highest for 4 years, evidence of growing confidence and a desire to move. There are 20% more homes for sale than a year ago as sales inventory returns to pre-pandemic levels. More choice for buyers will keep prices in check.
The last thing the industry needs is rising expectations from sellers that they could list their home for more than a year ago. Home movers should welcome the more positive news on the housing market as we start 2024 but vendors should be content that their home is likely to attract more interest rather than trying to push up asking prices.
While mortgage rates for many deals have fallen into the 4-5% bracket, buyers remain price sensitive and expect to negotiate on price.
Sellers have to remain realistic on pricing
Our data on agreed prices for mortgage applications shows that the average seller is accepting a price 5% below the original asking price. Discounts are slightly higher in southern England, averaging 5.5%, and slightly smaller across the rest of the country (4%).
Sellers that remain reluctant to list at realistic asking prices are having to agree to even bigger discounts to the asking price to agree a sale. We find that one in five sellers are having to accept more than 10% off the original asking price to get a sale.
This data, and continued cuts to asking prices for existing homes for sale, show that while the outlook is improving sellers need to remain realistic on pricing if they are serious about moving in 2024.
Agents can’t rely on the market to turbo-charge business plans
2024 is set to be a year of improving market conditions as the adjustment to higher borrowing costs continues to run its course. This will support business plans and revenue potential from new sales. Agents wanting to grow faster need to look at how investing in data, technology and software can provide new avenues to growing profitability and reach.
What today’s consumers have grown to expect is platforms that help you leverage your valuable consumer data to deliver more personalised and timely communications and experiences. Adopting this approach is how agents can ensure they stay ahead of the competition and capitalise on this positive sentiment in the market.
Richard Donnell is Zoopla’s executive director of research
