Real Estate Trends to Watch in 2024

It's been a wild couple of years in residential real estate. Who can forget those 2021 bidding wars when homes disappeared before they were listed? Well, at this point, those days are behind us, but the market isn't flatlining. Like any investment, you must stay ahead of the trends to come out on top. Knowing what is brewing in the real estate world can make all the difference in your next move, whether you're a seasoned investor or just starting out. Let's explore some of the important trends that will play in 2024.

1. Continued Climb in Home Prices

One of the trends that has the best chance of continuing into 2024 is steady increases in home prices. We have seen a strong demand for single-family homes, partly driven by low interest rates—at least until recently—and a growing desire for more personal space. That has been a boon for existing homeowners, who have watched their equity rise broadly. But to first-time buyers, it might seem like a moving target: trying to save for a down payment when home prices continue to rise. 

Some experts have even used the term "mortgage jail" to explain the concept. With rising home prices and ever-increasing interest rates, it's very tough for potential buyers, making a monthly mortgage payment quite unbearable, even when they have a reasonable down payment. Affordability decreased in April compared to the previous year as the median household income increased by 5.0% and the monthly mortgage payment increased by 12.9%. Mortgage rates also surged past 7%, further tightening the grip on buyers.

However, the consensus forecasts are still holding to modest positive growth in home prices, rather than dramatic spikes that we saw in the recent past. That may be a signal of a stable market ahead.

2. Move from Cities to Suburbs

A new study by Harvard researchers indicates millennials are fleeing cities at a pace similar to past generations. More interestingly, millennials have a higher propensity toward urbanism than their parents' generation and the Gen X percentage at a similar point in life.

The exodus from urban centers into suburbia, which was pandemic-fueled, isn't showing any signs of slowing down in 2024. People who used to love the hustle and bustle of city life now desire space, affordability, and a quiet environment. Several trends are driving this shift: cost, remote work, and lifestyle preferences.

The trend may no longer fit the clear-cut city versus suburb dichotomy. Instead, it's pointing to what's been called the rise of "middle neighborhoods," a growing place peripheral to major cities that provide a mix of urban convenience with suburban space. They often have downtowns that can be walked through, with public transportation and diverse housing options, making them appealing to a broader range of residents today.

3. Single-Family Housing Shortage

Although demand remains very solid for single-family homes, the supply side of the equation is far below par. Inventory levels were 36% below the average from 2017-to 2019 in January 2024, and outside influences imposed; a 56% ramp-up is needed just to get to that prior pace.

Imagine a game of musical chairs, but instead of chairs, it's houses. Although the searching buyers are so many, there are just too few numbers of houses to give to each. This can lead to bidding wars, frustrated buyers, and higher home prices.

So, what's the root of this shortage? Following the 2008 housing crisis, new home construction slowed significantly. Essentially, that means there just haven't been enough houses built over the past several years to keep up with the rising demand from a growing population. Institutional investors, such as large investment firms, have also been buying up single-family homes—especially starter homes—to diversify their portfolios. That can raise prices and make things even more competitive for regular homebuyers.

4. Sustained Higher Mortgage Rates

For many prospective homebuyers, the most significant barrier could be the cost of the financing rather than the price tag. Mortgage rates that were lower than usual during the last few years have rapidly risen.

Though there is some buzz that rates will decline later in 2024, the consensus among most analysts seems to be that they will likely stay at higher levels for some time compared to the rock-bottom rates seen earlier. This is due to a myriad of factors linked to inflationary control measures by the Federal Reserve and the general conditions of the economy.

But remember that with an election year—generally—a lot can change in predictions. By understanding the trends and facts now that influence mortgage rates, you'll be better positioned to navigate the market and make fulfilled decisions about your real estate goals.

5. Rising Associated Costs of Owning a Home

Homeownership is not just about the mortgage payment. There's a wide array of ongoing expenses that factor into the total picture, and many of them are growing in 2024. Bankrate's newest study shows that the annual cost of owning a home in the US has surged to $18,118. That figure includes property taxes, homeowners insurance, maintenance needs, energy consumption, and other miscellaneous housing-related costs.

Of late, it has become a real pain point to the homeowners. The cost in some areas increased outrageously; several states have even experienced the withdrawal of some insurance companies due to too high risks. Places like Florida and California are prime examples.

Property taxes are another expense that has been on the rise. The taxes are connected with increased regard for property values and may be burdensome for property owners, particularly for those with fixed incomes. This inflation has also driven up costs for repairs and maintenance. Any skilled labor, whether a plumber or electrician, comes on demand at higher prices for the house owner when things go wrong.

6. Sun Belt's Growing Popularity

The so-called "Sun Belt"—an area comprising southern and southwestern states soaking up warmth, sun, and good weather—has recently moved its way up the list. Not showing any indicators of its slowdown in 2024, this migration trend has come from city centers.

Statistics are emerging that, indeed, the Sun Belt captures an outsized share of U.S. population growth. More than half of all Americans now live in this Sun Belt, and these numbers will continue rising in the next decade.

What's driving this sun-kissed migration? Affordability and climate calling. Although certainly not cheap, compared to the stratospheric costs of living with many coastal cities, Sun Belt markets offer less price pressure on housing for both single-family and multifamily products. For many, getting out of the harsh winters and adopting an outdoor lifestyle year-round is a significant draw.

7. Digital-First House Hunting

The way we are hunting and purchasing homes has dramatically changed in the past few years. The time for flipping through a myriad of realtor flyers is long gone. Due to ease and convenience, almost all tech-savvy buyers have moved to digital-first house hunting. Nowadays, most virtual tours are hugely 3D and interactive. It makes it possible for interested buyers to feel the empowering ability in space, layout, and vibe before visiting a property in person. 

Sites like Zillow, RedFin, and FlyHomes are ideal real estate solution centers online. They let buyers source listings, filter them according to their criteria, and, in some cases, even reach out directly to real estate agents. It is the one-stop shop process whereby the search is made smooth for the buyer, who now has more information at their fingertips than ever. 

8. Decline in Big City Rentals

The meltdown in hot rental markets in big cities will see considerable mitigation in 2024. Years of selective avoidance of rising rent prices are suddenly slowing, and in some cases dipping slightly, across major cities. These changes are attributable to some critical key factors: price plateau, vacancy blues, and post-pandemic shifts.

Those runaway rents a couple of years ago may finally have hit the end of their runway. With affordability such a significant issue, renters are starting to push back, and some landlords have already been forced to rethink price strategies. 

The pandemic also drastically changed the way people live and work. With work-from-home increasingly the norm, many found the super-expensive city core lost its luster. It resulted in renters fleeing to the suburbs—or smaller, cheaper cities.

9.  Home Builder Incentives and their Impact on the Secondary Market

As interest rates rise, builders are pulling out all stops to slap up buyers. Credits towards closing costs and other incentives sound good to new homebuyers. But at what cost to the secondary market—that is, existing homes?

Because many builders are offering some desirable incentives, a good number of would-be buyers who otherwise might have targeted pre-owned homes are now looking at new construction. It ramps up the competition for a new home, drawing attention away from existing inventory—not good if you're selling in the secondary market.

That influx of new listings, coupled with a possible slowdown in the sales of existing homes, could create a case of "increasing months of supply." The high frequency measurements tell how long, on average, it would take for the sale of all listed homes for sale at this current rate.

A growing trend, with increasing months of supply, can put downward pressure on home prices in the secondary market, forcing the seller to revisit their asking price to make it more competitive.

10. NAR Settlement and its Impact

The latest development to hit the real estate market is an antitrust settlement with the National Association of Realtors. The March 2024 settlement resolved allegations that NAR rules artificially constrained competition on commissions related to home property sales. 

One of the main conclusions from this settlement is that this paves the way for changes in commission structures. This means more options in terms of commission and more excellent choices for consumers. Traditionally, these real estate commissions were fixed, meaning they are nearly always some percentage of the selling price and divided between the buyer's and seller's agents. With the settlement, more models can open where it will be just a flat fee or negotiable rate, ultimately affecting lower commission costs for both buyers and sellers. 

However, it's important to note that the full impact of the settlement is yet to be realized. The actual changes in the way commissions are structured most likely will differ based upon local market practices and regulations. It could be a little while before consumers feel the full effect of this court case. 

Final Thoughts

In 2024, the real estate market will become a rich tapestry interwoven with familiar and emerging trends. Some, like the growing popularity of the Sun Belt or the potential impact of the NAR settlement, bring new considerations for buyers, sellers, and investors alike, while others—like the persistent rise in home prices—feel very much like business as usual, a continuation of the recent past. 

So, how will you master this dynamic market in 2024? Knowledge is power; the more you know about the market, the better equipped you will be to make informed decisions. You need to identify whether you are a buyer, seller, or investor and what your goals are. Knowing your objectives will help you maintain a focus on those trends most applicable to your situation. It is a very fast-moving market, and the ability to adjust your strategies as needed will always keep you ahead.