What are the rental market predictions in 2024? Whether you’re a renter or landlord, it’s vital to understand how the market will shift in the coming year. This can help you determine where to invest or rent, what to do, and what to avoid.
Rental Market Predictions in 2024
According to the rental market forecast for 2024, we will see some trends continue from the previous year into the next. Rental investors will be reluctant to purchase new rental properties as mortgage rates remain high. Moreover, there will be more competition as real estate agencies seize opportunities in the slow housing market.
However, some trends in 2024 will change. For example, there will be an increase in rent growth outside the Sun Belt. The number of accidental landlords may also increase in the database of property managers’ client base.
Regardless, landlords and renters must stay aware of these changing trends. The rental market has been volatile in the last few years. There have been abrupt swings in supply and demand, as well as changes in preferences and where renters prefer to live. Will rent go up in 2024, or will they drop? Let’s examine the following trends in the rental market forecast in 2024.
Rise in New Apartments
The Census Bureau’s construction data shows that there will be a growth in multifamily infrastructure in 2024. Apartment units under construction have hit one million for the first time this past year. Moreover, these complexes are expected to be completed in 2024. As a result, 2024 will be the strongest year for multifamily housing since the 80s.
However, this surge in supply will not last forever. Developers have been adjusting their projects based on the higher interest environment we’re facing. Construction has started, and new building permits have fallen for over a year. Nonetheless, apartment completions will only reflect this slowdown starting in 2025. As for 2024, renters should be able to find more options.
Low Rent Growth
This past year, we’ve seen the second-slowest growth in rent since 2017. Demand will only increase slightly in 2024, but it shouldn’t make a significant impact. The major concern blocking demand is still affordability. Moreover, most Americans still lack confidence in the nation’s economy.
Couple this with the upcoming increase in supply, and the industry will likely see a modest rise in the vacancy index. Rent growth may be out of the negatives for early 2024, but it certainly won’t exceed the low single-digit range.
More Long-Term Renters
There likely won’t be a high demand for multifamily residences in 2024 despite the rise in supply. Furthermore, the barriers to homeownership will likely remain and support the demand for rentals.
Home prices will remain high, and mortgage rates will only moderately ease next year. As a result, home sales have slowed, and current homeowners are locked into their low mortgage payment plans.
Families within the United States will likely remain renters longer than previously. Renting makes more financial sense despite most people’s aspirations to become a homeowner. Moreover, even those further along the age range find themselves renting over buying.
Lower Rent Prices
Will rent go down in 2024? According to Redfin, asking rent prices are starting to go down quickly. The numbers in November have been down by 2.1% year over year. Moreover, other major reporting centers for rent prices have been predicting a downward trend.
This is likely because we have seen a mass construction of new multifamily housing units. More are scheduled to be released in 2024. Furthermore, new residential construction has dived as mortgage rates remain higher for longer.
Apart from this, many economists predict that the economy will cool in the succeeding months. This, along with rising costs and government shutdowns, will drop asking rents even further. Rent has been high in California, Miami, and New York. These high prices were driven well above inflation, and demand has declined.
Recent reports show that rents are significantly down in Oregon, Oklahoma, Florida, Texas, Washington, and Colorado.
Hybrid Work as the New Normal
More and more people have returned to office in 2023. Despite this, there seems to be no returning to the pre-pandemic working standard. Hybrid work seems to be solidifying itself as the new normal.
Latest estimates show that 28% of all working days are still done at home — this figure seems to stabilize. Roughly 42% of Americans have some remote work flexibility. Hybrid arrangements are also more common than fully remote work setups.
As a result, the demand for spare bedrooms and co-working spaces within multifamily complexes is expected to rise. Moreover, this drives up the demand for communities farther away from major job centers. Renters are more willing to bear longer commutes in a hybrid working arrangement.
Sun Belt Market Changes
The Sun Belt has seen the quickest growth in population in recent years. Thus, many landlords have raised their rent prices in hotspots like Texas and Florida. The Sun Belt has also accommodated this influx as new housing developments meet the increased demand.
In 2024, the Sun Belt will likely see ongoing strong demand. However, as new supply offsets the rising population and demand, rent prices will likely stagnate or fall.
Higher Cap Rates Outside the Sun Belt
As new apartments are built and delivered throughout 2024, the Sun Belt will see a downward pressure on rents. However, this may not be true for smaller cities outside the Sun Belt.
Cities in New England, the Mid-Atlantic, the Midwest, and South Central areas are more likely to have higher cap rates and stronger rent growth. This means investors and property managers should pay attention to these regions in the coming year.
Rise in Accidental Landlords
The housing market has remained stagnant in recent years. This has affected the rental market predictions in 2024. More potential home sellers will find themselves putting up their properties for rent until the housing market changes.
Property management companies should anticipate an influx in accidental landlord clients. While investors will still represent a bulk of rental property owners, property managers must stay vigilant and know how to serve the needs of individual property owners.
Be On the Lookout
Property management companies, landlords, renters, and investors should all be on the lookout for these emerging trends. The coming year will likely present new problems and challenges for people on different sides of the rental industry. Landlords may have a hard time raising rent prices in certain locations. Meanwhile, renters may find it easier to find a decently affordable rental home.
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