Here are 7 predictions for where the rental market is headed in 2024 from the economists at Apartment List as the once red-hot rental market of previous years has now cooled.
Here is a key topline summary for 2024:
- 2024 will be the strongest year for new apartment construction in decades, giving renters more options and better opportunities to negotiate price and lease terms.
- “We expect that year-over-year rent growth will crawl out of negative territory next year, but that it won’t rise above the low single-digits.”
- Even though mortgage rates are expected to ease modestly, home prices will remain prohibitively high and continue to create more long-term renters.
No. 1 – 2024 will bring the most new apartments in decades
Construction data from the Census Bureau suggests that multifamily supply growth should remain strong through 2024. The number of new multifamily apartment units under construction hit one million for the first time ever in 2023, and completions are expected to peak in 2024. With so many units in the construction pipeline, 2024 should be the strongest year for new multifamily supply since the 1980s.
No. 2 – Low single-digit rent growth in 2024
2023 is set to have the second slowest rent growth of any year in the history of our estimates (going back to 2017), coming ahead of only 2020. Looking ahead to 2024, “we expect demand to bounce back slightly, but remain on the soft side. The labor market remains fairly strong and there is likely some pent-up demand for new household formation. However, affordability continues to be a major concern and sentiment data shows that Americans still lack confidence in the economy. Even in the most bullish scenario, it’s unlikely that demand will be strong enough to outstrip all of the new supply that we know is coming, likely resulting in our vacancy index rising modestly from its current level in 2024. We expect that rent growth will rise out of negative territory early next year, but that it won’t get above the low single digits in 2024.”
No. 3- The changing rent vs. buy math will create more long-term renters
Many families are remaining renters longer than they may have in the past. Even those who can afford to buy in today’s market may find that renting now actually makes more financial sense. Although most Americans still aspire to own homes, more are now finding themselves renting later in life, and that trend is likely to continue. Consensus expectations are that mortgage rates will ease modestly next year, but likely not enough to significantly alter the prevailing dynamics of the for-sale market. As paths to homeownership fade for many, renting will increasingly be seen as the more practical housing option.
No. 4- Hybrid work will cement itself as the new norm for office jobs
In 2023, the remote work narrative focused on return-to-office plans, but this focus obscures the fact the pendulum will never swing fully back to the pre-pandemic norm. According to the latest estimates, 28 percent of all work days are still from home, and that figure appears to be stabilizing at that level. 42 percent of American workers currently have some form of remote work flexibility, and hybrid arrangements are much more common than fully remote ones. The data shows that hybrid work is here to stay, driving demand for rentals that provide spaces and amenities that blend work and home life for today’s flexible workforce.
No. 5- Sun Belt markets will see more renters, but not necessarily higher rents
The nation’s fastest population growth in recent years has been taking place throughout the Sun Belt. But in many cases, Sun Belt markets have also been among the most accommodating of growth, allowing for new housing development to meet the growing demand. The key takeaway: fast-growing Sun Belt markets will continue to be renter magnets, but rent growth should be kept in check thanks to lots multifamily development.
No. 6- As the economy takes center stage in the presidential election, candidates will need to speak to housing concerns
As we head into a presidential election year, the question of whether the economy is good or bad has proven to be surprisingly complicated. Most of the key indicators of economic health are looking quite strong, but economic sentiment surveys show that confidence and satisfaction in the economy remain weak. It’s likely that at least some of this disconnect is being driven by waning housing affordability. As the election cycle continues to ramp up, candidates on both sides of the aisle will need to articulate housing plans and speak to what has become one of the most pressing concerns of the American electorate. 2024 could be the year where housing rises to the forefront of the political discourse.
No. 7- More renters will use AI in their searches
“We expect 2024 to bring a new wave of AI-powered tools specifically for renters. It will soon become commonplace for renters to use AI in their apartment searches to search, compare, and coordinate actions. It will take time for these advancements to change macro market dynamics, but the next high-demand rental market cycle may look quite different with new power in renter’s pockets. And as adoption of AI-enabled rental search tools accelerates into 2024, both renters and property managers can seize opportunities from this new technological frontier.”
“2024 is certain to bring twists and turns no model can predict, as the new year always does. But we hope that by forewarning of what’s foreseeable—from new supply waves to persistent homeownership headwinds bolstering rental demand—we can help you prepare for what is ahead.”
About the Apartment List research team:
The Apartment List Research Team is a small group of economists and analysts dedicated to understanding the rental market as it evolves rapidly. “On our blog we publish original research reports and offer robust data products for public use.”