A market in housing is never static as it is always changing and transforming, especially after the COVID-19 pandemic that has caused economic and social implications. What are the trends, challenges, and opportunities that will characterize the different segments of the housing market for the year 2024, such as self-storage, affordable housing, manufactured housing, single-family rentals, condos, and senior housing? The following are a number of notable forecasts and insights from several experts and sources.
Mortgage Rates and Home Prices
Mortgage rates, which determine either prices or demand for homes, play a major role in the housing market. Mortgage rates reached a peak of 7.79% in October 2023, a level that posed a huge challenge to potential buyers in terms of meeting the down payment and the monthly repayment. Nevertheless, since 2014, the mortgage rate has been falling, and it reached 6.60% in January 2024 per Freddie Mac1. This is the bottom since May 2023, which can lead to a renewed home sell-out in the near future.
But obviously, low mortgage rates do not solve the crisis of affordability, which has long been holding the housing market captive. There have also been record levels of home prices, which have continued to escalate due to a low inventory, a high demand, and a limited supply of new constructions. The NAR2 reported that the median price of a home in the third quarter of 2023 was $407,800, which is 13.2% above the price recorded in the third quarter of 2022. On the optimistic side, home prices are expected to retain their 2023 gains in 2024, as the inventory is tight, and builders have higher costs and a shorter labor force.
That is, while the U.S. News Housing Market Index interactive tool that provides a data-driven summary of the nationwide housing market predicts that home prices will rise by 3.6% in 2024, the rate is substantially lower compared to the projected increase of 14.8% in 20233. Nevertheless, this decrease can be seen in some markets as some of them could experience a slowdown in price reduction or growth depending on the local supply and demand situation. For instance, the index has predicted that home prices in San Francisco are supposed to fall by 2.9% in 2024 while the prices in Phoenix are supposed to increase by 7.5%.
Existing Home Sales and New Home Sales
The other measure of the vitality and development of the housing market is the trade volume of homes, including existing and new homes. Home sales, in general, involve previously sold homes, while new home sales, refer to the sale and purchase of newly developed homes. The two types of sales are still experiencing the impacts of the pandemic and its subsequent effects but in different dimensions.
The lack of inventory since the beginning of the pandemic has hampered existing home sales as most homeowners have shown reluctance to sell their homes due to health concerns, economic instability, or unavailability of other homes. The National Association of Realtors2 reports that the rate of new home sales reached a 28-year low in 2023, standing at 4.1 million a decline of 16.4% from the previous year. Nevertheless, with mortgage rates reducing and additional homeowners becoming confident enough to put in their homes, sales of existing homes are likely to increase slowly in 2024. The multiple listing service provider, BrightMLS, predicts that the existing home sale is likely to grow to 4.6 million in 2024, which is a 12.2% increase from 2023. According to the U.S. News Housing Market Index, it is projected that existing home sales will grow by 8.5% in 2024.
As opposed to the new home sales, strong demand for new construction has contributed to a surge, as buyers search for bigger spaces, state-of-the-art facilities, and energy efficiency. New home sales take advantage of the fact that builders can lower the mortgage rate and offer incentives to potential buyers. Sales of new homes, reached a record high of 1.1 million during 2023, increasing by 10% over 2022, according to the U.S. Census Bureau5. In 2024, new home sales are forecasted to retain the size of the market share, thanks to the robust growth in construction and the demand for a new homes. In 2024, the U.S. News Housing Market Index expects new home sales to rise by 4.5% from the current period.
Rents and Rental Vacancies
A significant feature of the housing market is a rental market that captures the demand and affordability of renters, with about 36% of the U. The rental market has also become a field of major transformations as a result of the pandemic in terms of demand, supply, and prices.
The rental demand has been shaped by various factors, which include stimulus checks, unemployment benefits, and eviction moratoriums that have pushed renters to stay in their homes or move to places that are more affordable or better. The demand has also been adversely influenced by the altering lifestyles and working trends like work from home, online education, and social distancing that have led to the increase in the need for additional space and amenities. The competition caused by the for-sale market has also affected the demand as some renters have become homeowners while others have changed from owners to renters.
The supply of rentals has also been impacted by several factors, including the conversion of short-term rentals to long-term rentals, the rise of multifamily construction, and the emergence of new rental models such as single-family rentals, co-living, and build-to-rent. The supply has also been affected by accessible financing, tax incentives, and regulatory policies, it is has also been affected by the provision of their developments, which support or hinder the development and retention of rental housing.
The rentals’ prices also have been influenced by the dynamic of demand and supply, as well as the local market. In 2023, the rentals have seen a general upward trend; owing to the fact that demand has been higher than supply in most of the markets. As stated by Apartment List, a rental listing provider, the national median rent was up by 16.4% in 2023, and at December’s end, it reached $1,440. However, the rent growth has ranged from one market to another market based on the level of vacancy and inventory to competition and supply. For instance, the median rent for San Francisco went down by 5.9% in 2023 and the median rent for Boise increased by 39.4%.
The rents are projected to plateau in 2024, with the supply of rentals also catching up with demand, to closely follow the inflation rates. As per Zillow, an online real estate marketplace, the national median rent is forecasted to grow by 5.1% by the end of 2024, amounting to $1824 in December. But in different markets, the rate of rent growth can turn out to be either higher or lower, depending on local economic and demographic indicators. For instance, Zillow expects the median rent in Austin to rise by 9.6% in 2024, while the median rent in New York will only have a 2.9% increase.
Other Housing Market Sectors
Apart from the general tendencies in mortgage rates, home prices, home sales, and rents, there are also some sector-specific long and short-term trends and projections, for example, for self-storage, affordable housing, manufactured housing, single-family rentals, condos, and senior housing. Different sectors have their peculiarities, challenges, and opportunities, and they serve heterogeneous population groups and economies.
In addition, the self-storage sector has shown high resilience and profitability during the pandemic because it offers a flexible and convenient alternative for people who need temporary storage for their belongings, especially while they settle down, downsize, or renovate. Based on the data provided by the Self Storage Association, the self-storage industry obtained $49.5 billion in revenue for 2023, which is 9.4% more than the revenue received in 2022. The sector is poised to expand even more in 2024; the demand for self-storage continues to be high, and more new facilities continue to be supplied. As per the data provided by Yardi Matrix, a commercial real estate data provider, the self-storage inventory is estimated to rise by 7.8% in 2024 when it will add 64.7 million square feet of new space.
This is a sector that has been suffering from a persistent shortage and to meet an increasing demand, as the difference between income and housing costs gets wider and the supply of affordable housing decreases. As indicated by the National Low Income Housing Coalition, the shortage of 6.8 million affordable and available rental homes for extremely low-income renters means that people who have a lower annual income than the area median income of 30% are not sufficient. In 2024, support to this sector is likely to improve as the Build Back Better Act is implemented by the federal government with $150 billion allocated to affordable housing programs like the Housing Trust Fund, Low-Income Housing Tax Credit, and Housing Choice Voucher program.
Manufactured housing: It is this niche that has been picking up fame and acceptance because it is a cheaper, and environmentally friendly method of replacing conventional site-built housing. A report from the Manufactured Housing Institute shows that the manufactured housing industry recorded 118,000 homes in 2023, which is an 8.3% change from the previous year. In 2024, the industry is projected to expand further, due to the growing demand for manufactured housing, more new factories, and communities that are coming up. As per John Burns Real Estate Consulting, the managed housing shipments are likely to surpass 130,000 in 2024, recording a 10.2% growth from 2023’s performance.