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2024 U.S. Outlook For Short-Term Rental Market

Plus, in 2024, Househacking will be a household name and 6 more RE insights

Welcome to Zero Flux - A daily real estate newsletter of 5-10 market trends handpicked from > 100 sources, including paywalled articles.

No opinions, just data and facts.

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Real Estate Trends


Office Asking Rents Will Decrease 3% to 4% in 2024 link

  • The office rental market is facing significant challenges, with a decrease in both effective and asking rents. A CBRE report shows a downturn in the market, analyzing over 3,400 lease comparables from 2019 to Q3 2023.

  • Class A+/A office spaces have experienced a 1.2% decline in effective rents since 2022. This indicates a softening market for higher-end office properties.

  • The decline is more severe in Class B/C office spaces, with a 3.9% drop in rents. This suggests a broader market adjustment affecting various grades of office spaces.

Housing Starts Up 14.8% in November link

  • In November, privately-owned housing starts reached a seasonally adjusted annual rate of 1,560,000. This rate is a significant 14.8% increase from October’s revised number and 9.3% higher than the same period last year.

  • The rate for units in buildings with five or more units was 404,000 in November. This reflects a growing trend in multi-unit residential construction.

  • Building permits for privately-owned housing units were at a seasonally adjusted annual rate of 1,460,000 in November. Although this is 2.5% lower than October's revised number, it represents a 4.1% increase from the previous year, indicating sustained growth in housing development.

Home prices increased 6.3% over last year in October: FHFA link

  • U.S. house prices saw a year-over-year increase of 6.3% in October, according to the Federal Housing Finance Agency (FHFA) House Price Index. This growth, however, represents a slowdown compared to the previous month.

  • The Middle Atlantic division experienced the most significant increase, with home prices up by 9.9% year over year in October. In contrast, the Mountain division had the lowest gain at 2.6% compared to the same period in 2022.

  • Monthly price changes varied across regions, with the New England division seeing a decline of 0.3%, while the Middle Atlantic division witnessed an increase of 1.1%. The FHFA House Price Index provides insights into single-family home values across all 50 states and over 400 American cities.

Home prices climbed in October at the fastest annual rate link

  • In October, U.S. home prices saw a significant annual increase of 4.8%, marking the fastest growth rate of the year. This rise occurred despite a decrease in sales activity and reflects the ongoing issue of limited housing inventory, expected to persist into 2024.

  • The S&P CoreLogic Case-Shiller Home Price Index indicated a 0.6% month-over-month increase after seasonal adjustments. Notably, the National Composite rose by 0.2% in October, continuing a trend of nine consecutive monthly gains and surpassing the peak growth rate of 2022.

  • Regional variations were evident, with Detroit experiencing the highest annual gain of 8.1%. In contrast, Portland was the only city among the surveyed areas to report a decline in home prices compared to the previous year. This diverse performance underscores the varied dynamics in different U.S. housing markets.

The Pool of Accredited Investors Keeps Growing: New SEC Report link

  • The number of accredited investors in the U.S. has increased significantly, from 1.51 million households in 1983 to 24.3 million in 2022. This growth is attributed to the fact that the criteria for being an accredited investor have not been adjusted for inflation.

  • If adjusted for inflation since 1983, the net worth threshold for an accredited investor would rise from $1 million to $3,037,840. Similarly, the individual and joint income thresholds would increase significantly, potentially reducing the number of qualified investors.

2024 U.S. Outlook For Short-Term Rental Market link

  • The short-term rental (STR) market in 2023 experienced its first annual decline in Revenue per Available Room (RevPAR) since 2014, dropping by 4.9% in the U.S. Despite this, the market reached new heights with record demand in July and over 1.6 million listings by September.

  • For 2024, the STR market is projected to see a 10.7% growth in demand, supported by economic growth and domestic travel recovery. Occupancy is expected to stabilize around 54.7%, with Average Daily Rates (ADRs) increasing modestly by 2.1%, and RevPAR predicted to rise by 1.9%.

  • The economic context includes a significant drop in inflation and robust employment with wages growing faster than inflation. The housing market is expected to see a slight decline in home prices, with mortgage rates remaining elevated but decreasing slightly by the end of 2024.

Opportunities

Why 2024 is poised to become the year of the ‘house hacker' link

  • House hacking, where homeowners rent out parts of their property, has grown in popularity, especially among new real estate investors. This strategy helps offset mortgage payments, making it an attractive option in the face of high housing costs.

  • Fannie Mae's recent policy change, reducing the minimum down payment for multi-family properties to as low as 5%, is expected to significantly boost house hacking in 2024. This move opens up opportunities for first-time investors and those with limited capital.

  • The trend is particularly notable in urban areas with older housing stock and higher minority populations. House hacking is seen as a pathway to homeownership and building generational wealth, especially in communities where single-family homes are less common.

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U.S. Multifamily Outlook According to New Yardi Report 

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  • After two years of significant growth, the U.S. multifamily market saw a slowdown in rent increases in 2023, with a moderate growth of 0.4% year-over-year through November. This deceleration comes after a combined growth of 23.5% in 2021 and 2022.

  • The 2024 outlook anticipates challenges, including slowing national rent growth and a large influx of new supply. Approximately 510,000 of the 1.2 million apartment units under construction at the start of 2024 are expected to be delivered by year-end, the highest in decades.

  • Investment in the multifamily sector has decreased significantly, with sales down by 70% year-over-year. Factors such as rising interest rates and pricing uncertainty are likely to keep multifamily sales sluggish in 2024.

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