The real estate industry is one of the most high-valued markets in the world, with the US real estate market value reaching upwards of $130 trillion as of 2024. There is plenty of success to be found in the market as an investor, especially in real estate.
If you’re new to the real estate investment world, you’re probably wondering what avenue is the best for your financial future. Let’s explore the 2024 real estate industry, along with current market trends and the best way to adapt to the ebb and flow of an evolving market.
Image Source: Freddie Mac
2024 Housing Market Overview
Since 2020, the US real estate market has experienced an enormous shift. The super low mortgage rates of the early pandemic and the increased emphasis on hybrid or work-from-home working models gave way to a 7.2% growth in home sales (Fannie Mae). Investors took advantage of this change as well, accounting for 26% of single-family home purchases in mid-2023, according to Bankrate. During this time, inflation ballooned, with mortgage rates on a particularly steady incline from July 2020 onwards. Eventually, this heightened inflation would lead to a reference rate hike that forced a 10-year mortgage rate high of 7.63% in October 2023.
Because of this, potential home sellers became less inclined to put their houses on the market and were unwilling to finance a new home under the high mortgage rate. As a result, housing inventory shrunk, turning the real estate industry into a seller’s market, with the average home value experiencing a 3.8% increase to $363,438 by June 2024.
For current investors, the hike in home value offers a great return on investment. But, with mortgage rates affecting the buying power of prospective home buyers, many listings have found themselves sitting stagnantly on the market. This is especially true for homeowners with high-value, luxury properties. For example, in Brookline, MA, where the year-to-date median sales price of a single-family home as of July 2024 was $2,310,000, homes experienced a 69.2% increase in time (days) spent on the market (Massachusetts Association of Realtors). Though the same data has shown that sellers received 98.2% of the original list price at the end of the sale, excessive days on the market can prove costly for many investors.
Real Estate Market Trends to Consider
As of 2024, the rental market appears to be extremely favorable due to high interest rates and home prices. For the average individual, homeownership isn’t an accessible endeavor this year. On top of this, social and cultural evolutions have placed an increased emphasis on flexibility. In this respect, the rental is the new purchase as more people view it as the more appealing and sensible choice.
Renting offers individuals a level of convenience and possibility that ownership can’t. Home renters can simply move out at the end of their lease instead of dealing with a lengthy selling process; vacationers can take advantage of short-term rentals that are fully furnished and maintained instead of purchasing holiday homes. For real estate investors, this opens plenty of doors for financial abundance. The US short-term rental market is expected to increase to $81.63 billion by 2033, giving investors an interesting secondary income opportunity that promises long-term, healthy returns.
Prospective buyers and renters in 2024 are more interested in combining convenience with sustainability. So, investors who are looking to expand their real estate portfolio through flipping homes can benefit from knowing that the majority of Americans are willing to dish out more money for homes outfitted with the latest smart tech (Xara). Smart tech upgrades also tend to be cost-effective, which is a great benefit for investors looking to reduce costs for things like heating and cooling.
How to Adapt to the Evolving Real Estate Market
Developing a better relationship with the real estate market as an investor requires a bit of foresight and a lot of patience. But, there are a few central ways to ensure you are aligned with the contemporary market. First, you should keep an eye on all areas of the real estate market, from housing price and mortgage rate fluctuations to the growing or declining interest in real estate investment options like perpetual bonds or other REITs.
It is also helpful to consider the way homes are being sold and what that means for the real estate market as a whole. For example, Homes for Sale By Owner (FSBO) accounted for 10% of homes sold in 2021, an increase from 7% in 2020. Though FSBO sales do come with challenges, such as limited seller networks and personal bandwidth, many folks found this method of sale the best option during the beginning of the pandemic, as it gave them an opportunity to retain the 6% commission fee and provided more control over the sale. As an investor, keeping an eye on the number of FSBO properties on the market can indicate which areas may have more flexibility in terms of property prices, leading to a better return on investment.
Overall, the real estate values are expected to continue to increase toward the end of 2024 and onward. Though there is never a perfect time to invest in real estate, investors should explore all options for getting a firmer grip on the market, whether it be through acquiring property or investing directly into more passive ventures.
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