- Keys
- Posts
- 2024 Housing Predictions 🔮
Hey there investors, happy Thursday! 🏖️ Today's roundup includes:
2024 Housing Predictions: A fresh look at what's in store for the housing market next year.
Commercial Real Estate's Manageable Problem: Insights from Powell on the future of commercial real estate and banks.
Political Shifts in Housing Preferences: How politics are influencing where Americans choose to live.
🔥 Deal of the Day! 🔥: 4 bd | 4 ba | North Topsail Beach, NC
Forecasting the Real Estate Landscape: Insights into the 2024 Housing Market
The housing market has shown signs of shifting to favor buyers in 2024 after over two years of a red-hot sellers' market. Median home prices increased just 4.4% year-over-year in December to $382,600, indicating a cooling trend after double-digit price hikes. This presents an opportunity for investors seeking cash flow rentals.
Additionally, 30-year mortgage rates have fallen from their October high of 8% to 6.84% but likely won't dip below 6% until late 2024 per experts. Lower rates could drive a 13% increase in existing home sales this year. More sellers listing could ease the 3.2 months of record-low supply in December 2023. Still, housing inventory isn't expected to increase dramatically with rates above 6%, constraining home sales activity growth.
The declining yet sustained high rates have brought a 5-month streak of declining existing home sales before a slight November increase. This trend presents attractive cap rates for rental properties not reliant on owner-occupant mortgage rates. Investors able to pay cash or leverage alternative financing can capitalize on slowing demand among retail homebuyers.
Low supply also sustains median home prices and rents near record highs. Rents grew 5.8% in December year-over-year as rental demand outpaced housing starts in 2022. Multifamily property investors in particular can achieve healthy cash-on-cash returns.
Technology has enabled more investors to purchase out-of-state rentals sight unseen. However, boots-on-the-ground property management and community engagement remain vital to sustainable investments. Investors should evaluate both neighborhood growth potential and environmental impact when selecting markets and properties.
The cooling housing market provides attractive opportunities for rental investors. However, tailwinds of low supply, elevated construction costs and strong rental demand could shift the market dynamics again. Consistent evaluation of metrics and trends is key to navigating the fluctuating real estate waters. (source)
Powell's Warning: Commercial Real Estate Challenges Pose Risk of Bank Closures
Regional banks face losses from commercial real estate loan exposures, but the crisis seems avoidable per Fed Chair Powell. He acknowledges some small banks will close but larger banks can likely manage the problem.
Still, stocks plunged last week after $116B lender New York Community Bancorp cut its dividend, posted a surprise loss, and added to loan loss reserves tied to commercial real estate. Its stock fell 49% in two days before a small recovery, dragging the sector with it.
For banks over $100B, commercial real estate loans are just 13% of total credit. But for smaller banks they account for 44% on average, driving their outsized vulnerability. Office and multifamily housing loans in particular show weakness as property values sink amid the Fed's rate hikes.
Lender demand for new commercial real estate loans also fell last quarter on tightened standards, a trend expected to continue except for residential loans. So the market likely faces ongoing constraints in credit availability.
Powell believes larger banks can absorb losses thanks to stronger balance sheets. But New York Community Bancorp had unusually high exposures including 22% of loans tied to rent-controlled units facing new challenges. Its under-reserved position exacerbated the stock selloff.
The crisis may be avoidable if inflation stays low, allowing Fed rates to decline and preventing mass loan defaults. But further inflation spurring more hikes and potential recession pose “a perfect storm” for banks per analyst David Chiaverini.
Investors should watch macroeconomic trends closely to gauge commercial real estate market risk. Falling property values will likely sustain certain asset repricings. But cascading bank failures seem avoidable for now per Powell. Targeted opportunities could arise for cash-flush investors if conditions improve. (source)
Redfin Survey Reveals: A Third of Real Estate Agents Assist Relocating Clients in 2023
Remote work flexibility has enabled a record share of homebuyers to relocate between metro areas. Housing affordability remains the key driver, like from costly San Francisco and Seattle to more budget-friendly Austin and Phoenix. But one-third of agents surveyed have seen buyers primarily motivated by local laws and politics.
While most home search priorities still center on jobs, family, and schools, intensifying national political polarization increasingly spurs partisan migration. Buyers both leave and enter conservative states based on alignment with their personal beliefs.
For example, one family returned to New York for its stricter gun laws after a stint in Florida. But Austin agent Andrew Vallejo has helped multiple clients leave Texas recently, bound for blue state "safe havens" on women's reproductive rights and LGBTQ protections.
Red states attract some residents through business-friendly policies like lower taxes and fewer company restrictions. Idaho drew conservative immigrants from California seeking community with shared values.
The pandemic's work-from-home revelation enabled this trend by unlocking location flexibility. Diverging state laws on abortion, gun rights and other partisan issues provide the motivation.
Nationally, home prices slipped 0.2% in November, signalingPeak housing market prices likely occurred this summer before mortgage rates began falling from yearly highs. December pending sales increased for the first time in nine months as lower rates brought cautious buyers back.
If mortgage rates continue declining as expected, more significant home sales growth could occur. But inventory will remain low with supply still below 4 months in December. Sellers retained negotiating power to maintain near record prices.
Investors should watch for potential market softening if rates rise again or more new listings enter the market. But opportunities still exist, especially for all-cash buyers less reliant on fluctuating mortgage rates. (source)
🔥 Deal of the Day! 🔥
This property, located at 2385 New River Inlet Rd, North Topsail Beach, NC, offers a serene beachfront getaway with stunning ocean views, direct beach access, and spacious accommodations, making it an ideal vacation rental for those seeking a peaceful retreat by the sea.
Airdna data:
Estimated monthly payment: $5,104/month (if financed)
Estimated monthly revenue: $7,016/month
Cashflow excludes additional operating expenses. Always confirm local regulations, HOAs and permits before purchasing a property.
Ready to turn these insights into action? Dive deeper into your real estate investment strategies and explore the opportunities these trends may unlock for your portfolio.