2024 Housing Market Trends for SFR

What lies in store for SFR in 2024? It’s no secret that single-family rentals (SFR) are hot right now as more potential homebuyers are hoping for mortgage rates and home prices to cool. This presents a viable real estate opportunity, catering to people who don’t want to deal with 2023’s housing prices.

To get up-to-date and expert opinions on what to expect with SFR, our friends from SHARE, a platform that offers direct ownership of rental properties, are here to lend us their insights. We are so thankful for Andrew Kim, CEO and Co-Founder of SHARE and Dmitri Bourchtein, CIO and Co-Founder of SHARE, who have taken the time to respond to our questions.

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Q&A’s about 2024 SFR Market Trends

What do the experts from SHARE think about the real estate market for single family rentals next year? We asked them about some housing market predictions for the coming year. As seasoned pros in the single-family-rental space, Kim and Bourchtein responded to our market forecast questions.

Q: Are you noticing any market growth or decline in SFR into the new year?

A: “While the state of the SMR market varies by market, we are still observing growth, albeit slower than in recent years. (Reference: Corelogic)

“What we are noticing is that due to decreased investment activity, our ability to get modest discounts to list/asking price has increased, as has our ability to better negotiate terms.”

Q: Are you noticing any pricing trends? Do you keep rent high and try to fill rentals or do you get more competitive in price to get more applicants?

A: “The pricing strategy is dependent on the individual investor, however, given the high mortgage interest rate environment, the general focus is on keeping occupancy high and deferring value-add initiatives that maximize rental prices until a more opportune time.”

Q: Will rent prices stabilize or dip slightly? Are we undergoing rental market correction?

A: ”We have observed rental rates stabilizing, however, again this does vary by region. Some of the recent trends can be attributed to seasonality, however, some of it is driven by new supply coming to market.

This trend is expected to be short-lived as new home construction starts have decreased significantly from recent highs due to the higher cost of capital. Hence, we are not expecting a market correction for rental pricing and believe the fundamentals remain strong.”

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Q: What’s your hot take on crowdsourcing SFR?

A: ”We are firm believers that the best way to own SFRs is through direct ownership for the following reasons: superior access to debt, optimal benefits, and maximum control over decision making.”

Q: Financing: Are there trends in funding investments?

A: “Debt terms remain a significant challenge, however, proper planning for future flexibility should allow investors to take advance of improving conditions in the near/medium term and allow investments in SFR to remain strong on a risk-adjusted basis.”

Q: What are some trends you’ve noticed with residents?

A: “Here are a few of our observations:

  • “Occupancy rates have seen a minor decrease but remain strong (Source: Redfin). The short-term impact of new supply can put further downward pressure; however, overall imbalance of supply and demand should allow occupancy rates to remain high over the long-term.”
  • “Regarding trends in Tenant makeup; we’re noticing more multigenerational, multiple roommates. While the tenant makeup may continue to see changes in certain higher priced markets, with tenants being creative, we believe traditional SFR investments will maintain a similar tenant makeup and we don’t anticipate being targeting tenants differently in the near term.”

 

Q: Will a low Inventory of single-family homes and high interest rates keep people as renters?

A: “Yes – people will continue to be forced to rent as the discount to homeownership has increased due to the high interest rate environment and low supply of inventory.”

Q: Recently, there was a class action suit awarding billions of damages to home sellers in the antitrust class action. How will this affect SFR in 2024?

A: “We will continue to closely monitor the impact of these class action antitrust suits, but SHARE is focused on minimizing fees for buyers and sellers through our proprietary marketplaces and establishing master agreement on behand of investors to help drive economies of scale.

Q: What about that housing “crash,” do you think it’s going to happen?

A: “We do not believe so, especially in our target markets – the fundamentals remain strong with an imbalance between demand and supply, decrease in new construction starts, and overall affordability.”

Q: Is there going to be an SFR rent slowdown?

A: “While rent growth may see a slowdown in the near term, the trend is expected to be short lived.”

Q: How will investors mitigate risk factors in SFR?

A: “The main challenge is driven by debt capital markets, with investors able to mitigate long-term impact by purchasing all-cash or with flexible debt terms.”

There are a few ways SHARE suggested that investors can mitigate risk:

  • Longer lease terms to avoid any short-term impacts.
  • Higher emphasis on tenant screening.
  • Focus on specific markets and submarkets.
  • Focus on cost controls.

 

2024 Housing Market Trends for SFR

Thank you, SHARE, for giving us some valuable insights on the U.S. housing market for SFR! With housing affordability, higher interest rates, and low inventory in the forefront of everyone’s thoughts, SFR is positioned to have a year of growth and steady demand. If you’d like to talk about more real estate trends, contact us today!

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