Here are Apartment List’s economists’ predictions for rental markets in 2024 based on previous years’ cooling.
- Apartment construction will hit its peak in 2024, the strongest year in decades for apartment construction. In 2024, renters will have more options and better chances of negotiating prices and lease terms.
- It’s expected that rent growth will emerge from negative territory next year, but it won’t exceed low single-digit levels.
- The home price will remain prohibitively high in spite of the modest decline in interest rates, and the number of long-term renters will increase.
The following are the key highlights of the rental market for 2024:
1 – 2024 will see the construction of more apartments than ever before
According to data from the Census Bureau, multifamily supply growth is expected to continue through 2024. There will be one million new apartments under construction in 2023, and completions are expected to peak in 2024. The high number of units under construction are expected to fuel new multifamily construction in 2024.
2 -The 2024 rent growth rate will be low, in the single digits
It is expected that rent growth in 2023 will be slower than previous estimates (going back to 2017). It is expected that demand will remain soft through 2024 despite an anticipated bounce back. It is possible there is some pent-up demand for new homes, in spite of a relatively strong labor market. While affordability remains a major concern, it is evident that Americans lack confidence in the economy. There is little likelihood that new supply will outstrip demand in 2024, resulting in a modest rise in vacancy rates. In 2024, rent growth will remain within low single digit range despite emerging from negative territory early next year.
3 – Rents will become more affordable, and people will rent for longer periods of time
There is an increase in the length of time that renters stay in their homes. Today’s market may make renting more attractive even if you can afford to buy. Even though most Americans still desire to own their own homes, more are renting as they age, and the trend is expected to continue. Mortgage rates are expected to ease modestly next year, but the dynamics of the for-sale market will remain largely the same. Since the paths to homeownership are diminishing, many people will consider renting to be a more practical housing option in the future.
4 – Hybrid work will replace office jobs
It will never be possible to swing the pendulum completely back to pre-pandemic levels even with the focus on return-to-office plans in 2023. The number of work days completed from home appears to be stabilizing at 28 percent, according to the latest estimates. The percentage of Americans with remote work flexibility currently stands at 42 percent, with hybrid arrangements more common than totally remote ones. Work-life integration is becoming more important for flexible workers, as data shows.
5- Rents won’t necessarily rise in Sun Belt markets because of a higher number of renters in the rental market
There has been a rapid increase in population in the Sun Belt over the past few years. There has been an abundance of housing developments permitted in most Sun Belt markets to meet the growing demand for housing. Renters will continue to flock to fast-growing markets in the Sun Belt as a result of multifamily development.
6 – As the economy takes center stage in the presidential election, housing will be a major issue
We are now entering an election year, which makes the economy a more complex issue. However, economic sentiment surveys continue to show low levels of confidence and satisfaction despite most critical economic indicators being quite strong. Some of this disconnect may be attributed to waning housing affordability. During the election cycle and as housing becomes a more pressing issue, candidates on both sides of the aisle will have to articulate their housing plans. In 2024, housing could become a key issue in the political discourse.
7- Renters will use artificial intelligence more frequently
AI-powered tools will be available to renters in 2024. Artificial intelligence will likely be used by renters in the near future to compare apartments and coordinate their actions. It may take some time for these advancements to change macro market dynamics, but the next high-demand rental market cycle may look quite different with new power in renters’ hands. The adoption of AI-enabled rental search tools will accelerate in 2024, giving renters and property managers the opportunity to benefit from this upcoming technological frontier.
Lastly,
There will be surprises in 2024 as with every new year. Our aim is to prepare you for upcoming changes – from new supply waves to persistent homeownership headwinds that will support rental demand.