Next year is shaping up to be another interesting year for the U.S. real estate market, with challenges and opportunities for renters and homeowners.
Can we expect a dramatic shift away from high interest rates and low housing supply? What about those recession rumors? Then there’s the National Association of Realtors legal battles to consider. 2023 was a big year, and 2024 will be one, too.
Here’s where the real estate and investment experts at Arrived see us going.
Renters will struggle to find quality housing
The rental market is expected to remain steady in 2024, with Realtor.com predicting just a -0.2% decline in rent growth in 2024.
However, renters may face a challenging landscape when searching for quality rentals. For one, the Biden-Harris administration recently released the “Blueprint for Renters Bill of Rights,” outlining various renter protections, from securing safe housing to rent control and eviction protection. While not enforceable, the blueprint prompted a cascade of actions from groups like the Federal Trade Commission and the Consumer Financial Protection Bureau. Those moves, in turn, could lead to an increase in new pro-tenant laws across the nation, which could lead to landlords raising their standards for rental properties.
There is also the possibility of a recession, with Fannie Mae expecting an economic slowdown in 2024. Coupled with already tighter lending requirements, landlords may push for protective actions like higher minimum credit scores for applicants and larger security deposits to hedge against potential income loss and missed rent payments. While those moves are often typically during a recession, it can put added pressure on renters.
Where the job market goes, the housing market follows
An economic slowdown, low housing supply, and looming job insecurity could compound home buyers and renters’ difficulties. The precarious job market will heavily influence real estate decisions, as individuals may delay purchases due to job insecurity, impacting both supply and demand in the housing market. Realtor.com predicts housing inventory could drop by 14% in 2024.
The one bit of silver lining? While we likely won’t see a massive change in the housing market between 2023 and 2024, we could be trending in the right direction. Realtor.com estimates home prices could go down by 2%. If you’re a buyer with the budget, sellers may also be more willing to compromise on prices and terms, allowing you to have a greater say in the transaction.
Real estate appreciation will be a tale of two property values
Real estate appreciation might be a story of contrasts, depending on where you look. In areas with lower living costs but decently sized populations, like Charlotte, Knoxville, or Indianapolis, properties could continue to see appreciation climb above current averages. In 2023, Zillow named Charlotte, North Carolina, the nation’s hottest market, for example, due to factors like home price growth, inventory, and sale times.
But mortgage rates and remote-work possibilities could be strong headwinds against appreciation in higher cost-of-living markets. With mortgage rates predicted to hover around 6.8% in 2024, more would-be homebuyers nationwide may delay buying for another year.
Those figures could hit harder in urban areas, especially in cities where remote work is becoming more commonplace — like tech-heavy California. As much as 25% of the nation’s workforce could be working remotely by 2025, according to a study by Upwork. Without the need to relocate for a job, would-be buyers may opt for more affordable cities like Charlotte, potentially driving down home appreciation in some major cities. Austin, Texas, for example, saw a 4% decrease in home prices in 2023.
More unrepresented buyers will flood the market
With the National Association of Realtors embroiled in legal battles over commission rates and broker fees, regulatory changes could lead to significant shifts in the homebuyer experience.
We will likely see a push toward higher transparency, especially around commissions and fees.
While many real estate sales traditionally relied on the Multiple Listing Service or MLS — once considered sacred ground for property listings — and traditional broker sales, higher transparency could lead to more ala cart services for homebuyers over full agent representation. For example, we could see the rise of one-time payment services for home purchase contract reviews.
While it may be too soon to tell how the recent troubles with the NAR shake out, change will likely come for traditional homebuying sooner rather than later.
Owning equity instead of a home will be the new American Dream
The traditional American dream of owning a home could dramatically transform in 2024.
Today’s housing market is witnessing the most significant lack of affordability and accessibility in decades. In October 2023, interest rates for a 30-year conventional mortgage hit 7.9% — the highest the nation has seen since 2000. As a result, applications for mortgage loans hit a 28-year low.
Between low inventory woes and skyrocketing interest rates, first-time home buyers are struggling to break into the market. As these numbers are largely expected to continue in 2024, many buyers may realize it doesn’t make sense for their personal financial goals to purchase a home right away. Buyers may instead emphasize wealth building through strategic real estate investments while reimagining the concept of homeownership — especially as the market continues on the same path.
Arrived offers two avenues to invest in real estate. With Arrived, investors can purchase shares of our individual property offerings — all hand-selected by an expert team. Or, they can opt for one-click diversification through the Arrived Single Family Residential Fund.
