Are you planning on investing in real estate in 2024? If so, you’re making a smart choice! Rental properties will continue to remain a smart investment in 2024 that every investor can confidently invest in knowing that they will get an excellent return.
In this article, we will break down some of the reasons why rental real estate will be an excellent investment in 2024 and beyond.
What To Expect From The Rental Market In 2024
The National Association of Home Builders anticipates that single-family housing starts will rise by 5% in 2024 as steady interest rates combat inflation. In 2024, single-family production should rise to 925,000 units, up from 744,000 units in 2023.
More good news followed last month when Zillow released its 2024 real estate forecast, and the outlook from their economists is optimistic. Homebuying options will broaden a bit, and there will be more wiggle room in affordability.
Zillow experts predict that:
- Homeowners anticipating a return to the historically low interest rates of 2021 will come to the realization that the market has shifted, prompting them to list their homes for sale.
- Home values are expected to remain stable, and considering inflation forecasts, current interest rates are also anticipated to remain steady for the next few months.
- Modern families are opting to rent for more extended periods compared to past generations. Instead of the traditional approach of selling and buying a new home, current homeowners are capitalizing on this trend by choosing to rent while simultaneously acquiring another property.
- There will continue to be increased demand for rental properties within easy commuting distance to downtown hubs.
- Traditional homebuyers and home flippers might find themselves competing for the same properties.
Brokerage firm Redfin echoed Zillow’s optimism and released its own 2024 real estate forecast, which included:
- Concluding 2023 with a 3% year-over-year increase in median home prices, the outlook for 2024 anticipates a modest decline of 1%.
- A surplus in housing supply compared to demand will contribute to a potential decline in property prices.
- In 2024, there will be 4.3 million home sales, a 5% increase from 2023. The sales momentum will be steady throughout the year.
- A consistent trend of decreasing mortgage rates; however, it’s unlikely for them to fall below the 6% threshold.
- Sellers will continue to become more informed about hiring an agent and will be increasingly proactive about negotiating commissions with them.
- The American Dream continues to be redefined as young families perceive homeownership to be increasingly unattainable. Renting has lost its negative stigma, with these families and individuals looking to invest their money in alternative avenues beyond homeownership. This shift indicates a rise in demand for rental properties.
Mortgage Rates Drop, Expected to Stabilize
Despite the encouraging developments in housing supply and demand, a critical factor remains: mortgage rates. How are they expected to perform in the real estate landscape of 2024?
Mortgage rates have been hovering near 7%. The Financial National Mortgage Association, also known as Fannie Mae, predicts that the average mortgage rate will be at 7.3% in 2024 and 6.9% in 2025, which may mean more buyers will come on the scene in late 2024 and early 2025. Declining unemployment and strong job growth will also help to position people as buyers or investors in real estate debt investing.
The Mortgage Bankers Association noted that there was a decrease in the average contract interest rate from 7.37% to 7.17% for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less). Points dropped from 0.64 to 0.60 (including the origination fee) for loans with a 20% down payment. This level has yet to be seen since August.
As a result, there was a 14% increase in applications to refinance home loans—10% higher than the same week one year ago. These are positive indications for the real estate market in 2024.
For more information about investing in rental properties in 2024, or to learn more about the services that we can offer you, contact us today by clicking here.