Election Cycles In Real Estate
August 22, 2024
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September 3, 2024Apartment Rent Trends 2024
Anticipating a Return to Stability
If you are looking for information on apartment rent trends, then the market has witnessed unmatched fluctuations in recent years. This all started during the pandemic, which induced a significant surge in apartment rents, and the aftereffects are still present even though COVID-19 has bid farewell to the world. Since then, the industry has been on a rollercoaster ride.
The apartment rental market has experienced mixed trends in 2024. While some regions have seen rapid rent growth, with cities like Cleveland, Cincinnati, Columbus, and Chicago reporting significant increases in June according to RealPage, the overall picture is more complex. The year is also expected to witness substantial investment in the rental sector, with over 612,000 apartment units anticipated for purchase.
According to the Rental Housing Association of WA, several statements have been made nationally by multifamily executives who were participating in the outlook for 2024. They said a ray of hope is being anticipated in the world of apartments as the investment will become stronger and more beneficial in the latter part of the year. Do you want to learn about the apartment trends in 2024 and whether there is any chance of returning to stability? This blog will discuss several trends, the factors causing the biggest impact, and the possibility of returning to stability.
What Apartment Trends To Look Forward In 2024?
We know you are pretty eager to learn the apartment trends in 2024, so let's have a look at what's in store for you:
Supply | Surging Inventory
By Q3 of 2024 record new apartments have been brought online, and not just new development, but the year has brought newly converted hotels, offices, and other asset types adding to the supply. Census Bureau’s data says that like the previous year, multifamily supply growth should continue to remain strong throughout the new year too. How? For the first time ever, the number of new multifamily apartment units hit one million in 2023, and their completions are expected to reach their highest points in 2024. Therefore, having so many projects aligned, 2024 should claim the label of being the strongest year for new multifamily apartment supply.
How will this impact your investment? More supply means more choices for tenants. New and shiny products will attract tenants with lower rates and more concessions where amenities are prevalent. That puts owners of Class B and C apartments in a position where they must commoditize their rentals in order to compete.
If you’re looking to make your next investment in multifamily, consider the market’s Absorption Rate which can be calculated by dividing the total number of leased units by the total number of available units and multiplying by 100. The higher the percentage, the stronger the demand.
Rent Growth | Return of the Norm
Weak rental growth plagued 2023 and is set to have the slowest rent growth that was seen in any year. However, 2024 still looks brighter in this regard as experts expect the demand for apartment rents to slightly increase. The labor market has shown signs of weakening, and renters are likely to shop their options in order to properly hedge themselves.
However, coming back to the rent costs, affordability continues to be a major concern as American citizens cannot afford the rents of lavish apartments, and due to the inflation, they hardly trust the economy, thinking that they will suffer the loss and will not be able to recover from it. Even in the worst scenarios, it is highly unlikely to witness a strong demand that will be considered enough to surpass all of the incoming new supply. The rent growth is expected to escalate early next year, which will also lead the vacancy index to increase from its current level in 2024, but it still is not expected to get above the low single digits in 2024.
Renter Nation | Tenancy Expected to Last Longer
In recent years, an increasing number of families have chosen to rent for longer periods than ever before. Even those who can afford to purchase a home at current market rates find that renting often makes more financial and practical sense. With rising home prices and the significant upfront costs associated with purchasing property, renting offers a more affordable alternative without the need for substantial initial investments. Additionally, renting provides greater flexibility for individuals and families who may need to relocate for work, education, or other reasons, as well as freedom from the financial burden of maintenance and repairs.
The trend toward long-term renting is expected to persist, driven by affordability concerns and market dynamics. Although mortgage rates may soften slightly, this is unlikely to significantly alter the current landscape of the for-sale housing market. As home ownership remains out of reach for many, long-term renting will continue to gain popularity as a practical housing option. Renters will benefit from greater stability and predictable housing costs, while property developers and landlords may respond by offering more attractive long-term lease options.
Re-urbanization is Slower than Expected
The last 18 months have seen a strong impetus to bring the employees back to the office, but hybrid work still has a strong grasp on both employers and employees. Believe it or not, the latest data says that people prefer working from home 28% of all working days, and that figure is stationary. Another 42% of American workers presently have the benefit of a hybrid model where they work remotely 2-3 days a week and in office the others.
The statistics show that the hybrid system is not going anywhere since it has gathered many votes and employees are also comfortable with the idea. The half-work-from-home and half-from-office would also empower demands for rentals that offer amenities and spaces that give a good combination of work and home life to facilitate today’s workforce’s flexibility.
When Is The Apartment Rental Market Expected To Return To Stability?
Many industry experts have come forward in agreeing that the trend of decreased rent will taper off towards the end of 2024. Emily McDonald, Zillow’s rental trends expert, speaks with Architectural
Digest about how the rental market is experiencing stability after some wild fluctuations that we have all seen in recent years. It looks like both house providers and tenants have mutually agreed to adjust to contribute to a more stable market, where rent growth will remain consistent and not as aggressive as it was seen before.
What Lies Ahead?
The apartment rental market is gradually stabilizing after experiencing significant fluctuations. While 2024 promises a record number of new apartments, rent growth is expected to remain low. New supply is expected to radically drop starting in 2025 – 2026 as shown by the volume of new permits being applied for in most major cities. The shift towards long-term rentals and the persistence of hybrid work arrangements will shape the market. Overall, renters can anticipate some relief in terms of affordability as the market continues to adjust.
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