2024 Trends Signal Profitability Pursuit and Strategic Pivots in Uncertain Market
The real estate landscape is undergoing significant transformations in 2024, driven by a confluence of technological advancements, shifting market dynamics and evolving consumer behaviors.
The proptech sector, a technological cornerstone of the real estate space heavily reliant on venture capital, has encountered formidable challenges in the past year. The Federal Reserve’s rate hikes and a general slowdown in venture capital investment have created a challenging environment, leading to layoffs and financial struggles for prominent companies. The housing market’s conditions, characterized by soaring prices and limited availability, have compounded these problems.
Moving into 2024, technology companies in the real estate space will place an unprecedented emphasis on monitoring their balance sheets, with a sharp focus on immediate-term profitability. The year is likely to unfold with a strategic shift in business models, emphasizing the expansion of product offerings and investments in consumer education to adeptly navigate the housing market slowdown. Technology is set to emerge as a crucial tool in such sectors as the rental segment, with the advent of online rental screening software, enhancing efficiency, rent payment reporting, and thwarting fraudulent activities.
Despite uncertainties, optimism is likely to pervade the industry, with companies leveraging partnerships and eyeing potentially lucrative IPOs in the future. The resilience and innovation demonstrated by the formation of new companies underscore the sector’s potential to thrive amid both adverse and favorable conditions.
National vs. regional:
In a notable departure from their traditionally local focus, real estate agents now need to think more nationally as opposed to regionally. This shift is propelled by the increased migration of people. This movement is evident in several data points, including RentSpree user statistics showcasing a growing spread of rental applicants across the nation. Between 2021 and 2023, approximately 17 percent of rental applicants sought housing in other states, reflecting an upward trend from 14 percent in 2020 and 12 percent in 2019.
This nationalization is underpinned by two fundamental factors. First, housing affordability has plummeted to its lowest level in over 30 years. The combination of escalating home prices and rapid increases in borrowing costs has prompted individuals to explore housing options beyond their current locations. Second, remote and hybrid work options, increasingly prevalent since the pandemic, will crystallize as a more permanent fixture of the professional landscape this coming year.
This combination of affordability challenges and the evolving nature of work will foster increased migration to secondary markets nationwide. This shift not only holds promise for relative affordability but also aligns with lifestyle preferences. The more nationalized approach to real estate will impact organizations supporting industry professionals and the individuals actively servicing the sector.
Source of truth:
Multiple listing services (MLSs), traditionally recognized as the source of truth in the for-sale segment, will face the imperative to extend this role beyond the housing sector to the rental market in 2024 more so than ever.
The current absence of rental listings on most MLSs has significant repercussions, resulting in financial losses for both agents and tenants. An estimated 60 percent or more of rental properties are absent from MLSs, curtailing exposure and profitability for agents and landlords alike.
Advocating for standardized data for rental listings, diverse compensation models for agents, and the provision of reliable and timely information for renters will be key especially this coming year as rentals will play an increasingly important role in the real estate market and people’s lives given the severe affordability issues permeating the for-sale sector. The inclusion of rentals in MLSs stands to streamline the rental process, minimize delays, and instill efficiency.
A tale of two markets:
Just as industry organizations will have to be more inclusive of the rental space, the individuals servicing the sector will also have to focus more on this market segment given the formidable financial barriers to purchasing a house. The cost differential between buying and renting, with the former averaging 52 percent higher, underscores the financial challenges associated with homeownership.
In 2024, the rental market will be an increasingly pivotal player, presenting more choices and decreased competition for renters. Construction of new units, according to a recent Zumper National Rent Report, contributes to a market dynamic where prices are decreasing in numerous regions. As a result, the focus in 2024 will further move toward the rental market, offering a lifeline to those seeking shelter as well as to those working in the sector. The emphasis in 2024 will be on generating leads and income away from the lucrative for-sale market to help bridge the gap for agents during challenging times but also serving as an investment into the future for both new and seasoned real estate professionals.
Last but certainly not least, with affordability as a primary concern, new tools that are intended to support greater financial empowerment will continue to gain prominence this coming year. Rent payment reporting has emerged as a crucial component in fostering a fairer financial future for all participants in the real estate ecosystem. California’s SB 1157, introduced in 2021, exemplifies the legislative momentum in this direction. The law supports tenants in subsidized properties by advocating for rent reporting to credit bureaus, a local initiative with the potential to catalyze nationwide rent reporting legislation.
Major players in the mortgage industry, such as Fannie Mae and Freddie Mac, have initiated programs to incorporate rent payments into credit histories. Fannie Mae’s pilot program, extended until December 2024, signifies a commitment to exploring the far-reaching implications of including rent payment history in credit reporting. This inclusion carries profound empowering potential, influencing loan approvals and addressing racial disparities prevalent in the housing market. As we chart the trajectory toward a more equitable financial future, additional private sector solutions are likely to emerge in 2024 and become instrumental in facilitating this transformative change.
In conclusion, the real estate industry in 2024 will be characterized by a dynamic interplay of technological evolution, market shifts and socio-economic factors. Each trend outlined above will contribute to a narrative of an industry in flux, where adaptation and innovation are the cornerstones of success.
Michael Lucarelli is the CEO and co-founder of RentSpree.