Along with burgeoning interest rates, lack of supply has been one of the biggest headaches for buyers of US property in 2023. While mortgage rates are expected to fall slightly, inventory levels are not likely to improve next year. As a result, price wars will continue, and rental property will be the only option for many would-be homeowners.
Lack of property will be the biggest pain point
The latest predictions for the US property market next year show little respite for homebuyers. Although mortgage rates should dip to an average of 6.5% by the end of 2024, a shortage of homes will be “the largest pain point for many homebuyers”.
According to realtor.com, “buyers might not find anything they want even as it gets a little cheaper to purchase a home”. The real estate portal refers to this situation as a “self-perpetuating cycle”. Furthermore, it forecasts an inventory drop of 14% next year as even fewer current owners put their homes on the market.
Good news in new construction
Would-be buyers will, however, find some relief in the new-build sector. Realtor.com reports that just under one million new homes should enter the US property market next year. Buyers will, therefore, find an extended choice and also benefit from mortgage rate buy-down incentives.
This new construction will continue the trend seen this year when new homes accounted for nearly one-third of the market. This share is more than double the 12 to 14% historic average.
As a result, build-to-rent investment will remain popular in 2024. This sector registered an unprecedented boom in 2022, when 47% more build-to-rent properties were completed than in 2021. Southern metros saw the highest levels of this type of construction, with Tampa, Jacksonville and Sarasota the three hottest build-to-rent areas in Florida.
US property prices in 2024
The realtor.com predictions also look at prices next year and conclude that 2024 will see a slight drop. The property portal expects prices to fall by around 1.7%, allowing buyers some respite but not as much as they’d like.
“It’s a really minor drop on top of what have been really major price gains over the last decade,” said Danielle Hale, Chief Economist at realtor.com.
Rental rates in 2024
With the “stormy” predictions for inventory levels, set to plummet by 14% next year, many would-be homebuyers will have no alternative but to rent in 2024. Realtor.com also looks at what they can expect in rental rates.
Here, too, will be some relief, although even less than for property prices. After “meteoric price growth”, rental rates should drop by 0.2% next year. “The fact that they’re not continuing to go up is going to be a welcome change,” said Hale.
She also pointed out that the surge in apartment construction over the last year should help ease the supply chain. The higher availability of rental properties should then, in turn, take the pressure off rental prices.
However, much will depend on demand, and analysts believe that popular areas will continue to register low vacancy rates in 2024. The lack of rental properties was a particular problem in Florida, with Miami the most competitive market in the country. Orlando stood in ninth place, with Broward County in tenth.
(Source: realtor.com)
