Real estate investing has always been a popular and lucrative way to generate passive income and build wealth. However, the year 2023 was a challenging one for many real estate investors, as the global pandemic, economic recession, and social unrest affected the housing market in various ways. In this post, we will review some of the major trends and events that shaped the real estate investing landscape in 2023, and what they mean for the future of the industry in 2024.
Low inventory and high demand: One of the most noticeable features of the 2023 housing market was the low supply of available homes and the high demand from buyers. According to the National Association of Realtors, the inventory of homes for sale in the US reached a record low of 1.9 months in November 2023, down from 3.6 months in November 2022. This created a seller’s market, where home prices soared and bidding wars were common. The median existing-home price in the US was $353,900 in November 2023, up 13.9% from a year ago. The low inventory and high demand were driven by several factors, such as the low mortgage rates, the limited new construction, the increased remote work and relocation, and the pent-up demand from the pandemic.
Rental market recovery: The rental market was hit hard by the pandemic, as many renters faced financial difficulties, eviction moratoriums, and health concerns. The vacancy rate for rental units in the US rose from 6.4% in the fourth quarter of 2022 to 7.4% in the second quarter of 2023, the highest level since 2014. However, the rental market started to recover in the second half of 2023, as the economy reopened, the vaccination rate increased, and the stimulus checks boosted consumer spending. The vacancy rate dropped to 6.8% in the third quarter of 2023, and the average rent increased by 10.3% year-over-year in November 2023, the highest growth rate since 2016. The rental market recovery was especially strong in the urban areas, where rents had declined the most during the pandemic, as well as in the Sun Belt and Midwest regions, where rents had remained relatively stable or increased.
Technology and innovation: The year 2023 also witnessed the rise of technology and innovation in the real estate investing industry, as investors and professionals adapted to the changing market conditions and consumer preferences. Some of the notable trends and developments in this area included the following:
Online platforms and tools: The pandemic accelerated the adoption of online platforms and tools for real estate investing, such as virtual tours, digital closings, online marketplaces, and crowdfunding. These platforms and tools enabled investors to access more information, opportunities, and resources, as well as to save time and money. For example, Roofstock, an online marketplace for single-family rental properties, reported a 250% increase in transaction volume in 2023 compared to 2022.
Artificial intelligence and data analytics: Artificial intelligence and data analytics became more prevalent and sophisticated in the real estate investing industry, as they helped investors and professionals to make better decisions, optimize performance, and reduce risks. For example, Mashvisor, a data analytics platform for real estate investors, launched a new feature called Mashmeter in 2023, which uses machine learning to rate the profitability of any rental property in the US on a scale of 0 to 100.
Sustainability and social impact: Sustainability and social impact became more important and influential in the real estate investing industry, as investors and professionals sought to align their values and goals with the environmental and social needs of the communities. For example, Fundrise, a real estate crowdfunding platform, launched a new investment option called the ESG Portfolio in 2023, which focuses on properties that meet the environmental, social, and governance criteria, such as energy efficiency, affordability, and diversity.
What to Expect in 2024
Looking ahead, the real estate investing industry is expected to continue to grow and evolve in 2024, as the market conditions and consumer preferences change. Here are some of the predictions and expectations for the next year:
Inventory and demand balance: The inventory of homes for sale is expected to increase in 2024, as more sellers list their properties, more new construction is completed, and more foreclosures are processed. This will ease some of the pressure on the home prices and create more opportunities for buyers. However, the demand for homes will also remain strong, as the economy recovers, the population grows, and the millennials enter their prime home-buying age. Therefore, the market will still favor sellers, but not as much as in 2023.
Rental market growth: The rental market is expected to grow further in 2024, as more renters return to the urban areas, more young adults form households, and more people seek flexibility and affordability. The vacancy rate will decline, and the rent will increase, especially in the markets that have strong job growth, population growth, and quality of life. The rental market will also become more diverse and competitive, as more investors enter the space, and more rental types and models emerge, such as short-term rentals, co-living, and build-to-rent.
Technology and innovation advancement: The technology and innovation in the real estate investing industry will advance further in 2024, as more investors and professionals adopt and utilize the existing platforms and tools, and as more new and improved platforms and tools are developed and launched. The technology and innovation will also become more integrated and accessible, as they are incorporated into the mainstream and standard practices and processes of the industry. The technology and innovation will also become more personalized and customized, as they cater to the specific needs and preferences of the investors and professionals.
Conclusion
The year 2023 was a remarkable and challenging year for the real estate investing industry, as it faced and overcame many obstacles and uncertainties. The year 2024 will be an exciting and promising year for the industry, as it embraces and leverages many opportunities and possibilities. As a real estate investor, you should stay informed and prepared for the changing market conditions and consumer preferences, and take advantage of the technology and innovation that can help you achieve your goals and dreams.
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