Redfin Predictions for 2024

Plus, Why Midwest Housing Market Has Been So Strong and 6 more Real Estate Insights.

In partnership with

Before we continue... a huge thank you to this week's sponsor.

  • WebStreet is the first platform to offer accredited investors passive ownership of cash flowing online businesses.

  • How? They acquire high-growth businesses like Micro-Saas, and Amazon FBA at low multiples giving investors an asymmetric bet to the upside. 

  • So while real estate bubbles are popping and the stock market is looking shaky, WebStreet is on track to deliver over 20% IRR to its investors. 

  • Find out why investors are buzzing about their newest round here.

Macro Trends

Mortgage Loan Limits Are About To Increase In 2024 link

  • In 2024, the Federal Housing Finance Agency and Federal Housing Administration will increase loan limits for homebuyers. This change is part of an annual adjustment to align with rising house prices.

  • For FHFA loans, the new limit will be $766,550, up from $726,200 in 2023. In high-cost living areas, the limit can reach up to $1,149,825, benefiting buyers in places like California, New York, and Hawaii.

  • FHA loans, appealing to those with lower down payments or credit scores, will see their limit rise to $498,257 from $472,030. These loans require a minimum 3% down payment and include private mortgage insurance.

Real Estate Trends

Redfin Predictions for 2024  link

  • Home prices are expected to fall by 1% in 2024, marking the first significant decline since 2012. This decrease is seen as a positive shift for buyers, especially since home prices ended 2023 up by around 3%.

  • New listings are anticipated to increase, contributing to the drop in home prices. The rise in listings is partly due to homeowners accepting that mortgage rates in the 3% or 4% range are unlikely soon, prompting them to sell before further price drops.

  • Home sales are projected to grow by 5% in 2024, with a total of 4.3 million sales expected. This increase is attributed to improved affordability and a greater number of homes on the market.

BTR Asset Class Poised to Become Institutionalized link

  • Build-to-Rent (BTR) properties are emerging from a niche status, driven by increasing interest from investors and developers. Cushman & Wakefield's report highlights the growing appeal of BTR in the multifamily market.

  • Currently, BTR constitutes only 1% of the overall multifamily market, but it's gaining momentum. The shift in resident perceptions of what constitutes a "rental home" is contributing to this trend.

  • The report suggests a significant potential for BTR to expand and redefine the rental housing market. This change is indicative of evolving market dynamics and consumer preferences in the real estate sector.

Midwest Strength Stems from Stability, Not Apartment Demand link

  • The Midwest region has shown resilience in apartment market performance, with many markets leading in rent growth and maintaining stable occupancy. This stability is attributed not so much to strong apartment demand but to the region's moderate supply compared to other U.S. regions.

  • Apartment demand in the Midwest accounts for only about 15% of the total U.S. demand, with the Sun Belt and Mountain regions dominating at 70%. Despite lower demand, the Midwest's supply volume is also more moderate, allowing it to sufficiently meet the existing demand, contrasting with other regions where supply heavily outweighs absorption.

  • The current trend in the Midwest, where supply and demand are more balanced, is unique compared to the rest of the nation. This balance has helped the region maintain a relatively stable apartment market, even as other areas face challenges with excessive supply.

Pro Member Only Content

7 Predictions for the 2024 Rental Market 

(This content is restricted to Pro Members only. Upgrade)

  1. Historic High in Apartment Construction: 2024 is set to witness the highest number of new apartment constructions in decades, with a peak in completions expected, marking the strongest year for new multifamily supply since the 1980s.

  2. Modest Rent Growth: Despite the increase in supply, rent growth in 2024 is predicted to be modest, likely remaining in the low single digits. This is due to a balance between the new supply and the demand for rentals.

  3. More Long-Term Renters: Changes in the rent vs. buy equation, influenced by high home prices and mortgage rates, are expected to result in more people opting to rent for longer periods.

  4. Hybrid Work Influencing Rental Demand: The shift towards hybrid work models is reshaping rental demand, with an increased need for multifamily communities that offer work-friendly amenities and spaces.

  5. Sun Belt Markets Attracting Renters: While the Sun Belt region is expected to continue attracting a large number of renters, rent growth in these areas might be moderated by the new housing supply.

  6. Housing Concerns in Presidential Election: The 2024 presidential election is likely to see housing affordability and supply issues becoming key topics, with candidates needing to address these concerns to appeal to voters.

  7. AI in Rental Searches: The use of AI in rental searches is expected to become more common, changing how renters find and select apartments, and offering new tools for both renters and property managers.

    link

Experts Project Home Prices Will Rise over the Next 5 Years 

(This content is restricted to Pro Members only. Upgrade)

  • Despite concerns of a price crash, data shows home prices are rising in most of the country. A Fannie Mae survey found that 23% of consumers expect prices to fall in the next 12 months, reflecting widespread uncertainty.

  • The Home Price Expectation Survey (HPES) from Pulsenomics, including over 100 experts, forecasts home prices to increase annually through 2027. This projection suggests a steady, cumulative appreciation rather than a sudden spike.

  • For homeowners, this trend could mean significant wealth accumulation. For example, a $400,000 home bought at the beginning of the year could gain over $71,000 in value over five years, according to HPES forecasts.

    link

Promising Signs for the 2024 Housing Market - New Data

(This content is restricted to Pro Members only. Upgrade)

  • The US housing market is showing signs of recovery, with an expected increase in home inventory by the end of 2023. This increase is a positive indicator for the 2024 market, suggesting more home sales due to slightly more sellers being present.

  • Inventory trends and mortgage rates are closely linked, with rising rates leading to more inventory and vice versa. The recent decrease in mortgage rates hints at a potential decrease in inventory, impacting buyer competition and selection in 2024.

  • Price reductions in the housing market are declining, indicating stable demand for homes at current prices. The median price for single-family homes remains steady, with no current data suggesting a downward pressure on home prices for 2024.

  • link

That's all, folks. If you enjoyed today's issue, please reply (it helps with deliverability)

Cheers,

Vidit

P.S - If you are finding value, please consider helping the newsletter by becoming a paying subscriber

A subscription gets you:

✓ Content delivered 5-6 days a week

✓ Exclusive insights that are usually tucked behind paywalls (which I cover the costs for)

✓ Curated Top 10 lists

✓ The latest updates on prop-tech funding rounds

Subscribe for free to keep reading

This content is free, but you must be subscribed to Zero Flux to continue reading.

Already a subscriber?Sign In.Not now

Join the conversation

or to participate.