Apartment List economists predict 7 trends for 2024 in the wake of the once-hot rental market of previous years.
The following is a summary of key developments for 2024:
- Renters will have more options and better bargaining power in 2024 when new apartment construction reaches its highest level in decades.
- Next year, year-over-year rent growth will climb out of negative territory, but will not exceed single digits.
- Although mortgage rates are predicted to ease modestly, long-term renters will continue to increase.
In 2024, we can expect the following
Renters in 2024 will have access to more apartments than ever before
Multifamily supply growth is expected to continue until 2024, according to Census Bureau data. Multifamily apartment construction peaked in 2024 with one million units under construction for the first time ever. 2024 should see the highest level of new multifamily supply since the 1980s due to so many units in the pipeline.
Growth in rent in 2024 is expected to be in the single digits
Rent growth is expected to slow in 2023 (going back to 2017). The market is projected to remain soft in 2024 despite a slight rebound in demand. The labor market’s pent-up demand may slow the formation of new households. In spite of this, Americans still have concerns about affordability, and sentiment data indicate they are unconfident about the economy. It is likely that our vacancy index will rise modestly from its current level in 2024, even under the most optimistic scenario, where demand outstrips new supply. Within the next few years, rent growth will emerge from negative territory, but it won’t reach double digits.
The rent vs. buy equation will change, resulting in longer-term renters
There is an increase in the number of renters who stay in their homes for longer periods of time. Even those with the means to buy are finding that renting makes more financial sense today. The number of Americans renting their homes later in life is likely to rise, even though many aspire to own their own homes. For-sale market dynamics should not be significantly altered despite modest mortgage rate reductions expected next year. The path to homeownership is fading for many people, so they will consider renting as an alternative to owning.
Office jobs will become hybrid in the near future
While 2023 is anticipated to be a year of returning to the office, the pendulum will never swing back to the pre-pandemic state. The percentage of work days occurring from home continues to be approximately 28 percent. In terms of hybrid arrangements, more than 42 percent of American workers currently work remotely. Data shows that flexible workplace accommodations are in high demand in today’s workforce.
More renters are expected in Sun Belt markets, but rents are not necessarily going to rise
In recent years, the population of Sun Belt states has grown at the fastest pace in the country. Although many Sun Belt markets have been accommodating of growth, new housing development has also been possible. A fast-growing Sun Belt should be able to keep rent growth in check through multifamily development.
Candidates will need to address rental market issues as the economy is at the forefront of the presidential election
Despite the fact that we are heading into an election year, we have discovered that our economy is surprisingly complex. Economic sentiment surveys indicate that confidence and satisfaction remain low despite most economic indicators showing the economy to be doing well. In part, waning housing affordability may be responsible for the disconnect. The current election cycle requires candidates on both sides of the aisle to communicate their housing plans and address one of the country’s most pressing issues. The political discourse of 2024 may be dominated by housing.
The use of artificial intelligence by renters will increase
Our expectation is that AI-powered tools will be available to renters by 2024. Renters will soon be able to search, compare, and coordinate apartment searches using artificial intelligence. The next cycle of high-demand rentals may have a stronger hand for renters as a result of these advancements. By 2024, AI-enabled rental search tools will be a valuable tool for both tenants and property managers.
Final thoughts
Unlike previous years, 2024 will bring twists and turns that no model can predict. Whether it’s new supply waves or persistent homeownership headwinds boosting rental demand, we provide you with information that helps you prepare for what’s ahead. Please schedule a call with us if you’d like to discuss your rental property.