The landscape of real estate is undergoing significant transformations in 2024, driven by a confluence of technological advancements, shifting market dynamics and evolving consumer behaviors.
1. Technology 2024: Proptech challenges and profitability pursuit
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 challenges.
As we enter 2024, proptech companies are likely to place an unprecedented emphasis on monitoring their balance sheets, with a sharp focus on immediate-term profitability. The year will 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 in both adversities and favorable conditions.
The technology likely to have the biggest impact in 2024
- Data-driven property management: Real-time insights into property performance optimize rents, maintenance schedules and tenant satisfaction.
- Remote work: Technology enablement creates more flexibility and freedom.
- Cybersecurity in real estate: Increasing investments protect sensitive property and financial data in the digital realm.
- Artificial intelligence (AI) and predictive analytics: Revolutionizing decision-making with data-driven insights, predictive property values and investment opportunities, expediting the process by removing manual tasks.
- Augmented reality (AR) and virtual reality (VR): Transforming property viewing experiences with virtual tours and enhanced property visualization.
2. The emergence of secondary markets will challenge the traditionally popular locales in 2024
In a notable departure from its traditionally local focus, more than ever real estate agents in local markets are needing to think more nationally as opposed to regionally. This shift is propelled by the increased migration of people, as evidenced by a variety of data points. RentSpree user statistics have showcased a significant spread of rental applicants across the nation. Between 2021 and 2023, approximately 17% of rental applicants sought housing in other states, reflecting an upward trend from 14% in 2020 and 12% in 2019. This trend is likely to intensify this coming year.
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. Secondly, remote and hybrid work options, increasingly prevalent since the pandemic, are becoming a permanent fixture of the professional landscape.
As we prepare for 2024, the challenges of affordability 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.
3. Multiple listing services need to become the source of truth for rentals
Multiple listing services (MLSs), traditionally recognized as the source of truth in the for-sale segment, will more so than ever face the imperative to extend this role to the rental market in 2024. The current absence of rental listings on most MLSs has significant repercussions, resulting in financial losses for both agents and tenants. More than 60% 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. Rentals will continue to 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. The benefits extend to increased agent commissions, strengthened sales pipelines and a reduction in fraudulent activities.
Bright MLS, one of the largest MLSs nationwide, is leading the way and has integrated rental listings with commendable success. This proactive move serves as a testament to the positive outcomes achievable through aligning MLSs with the evolving dynamics of the real estate landscape.
4. Flourishing during challenging times: A tale of two (interconnected) markets
The prospects of homeownership in 2024 remain elusive for many. With rates hovering between 7% and 8% and single-family home prices still at record highs, the financial barriers to purchasing a house are and will continue to be formidable. The cost differential between buying and renting, with the former averaging 52% higher, underscores the financial challenges associated with homeownership.
In contrast, the rental market is emerging as a pivotal player, presenting increased choices and decreased competition for renters. Construction of new units, as highlighted by a recent Zumper National Rent Report, contributes to a market dynamic where prices will continue to decrease in numerous regions. As a result, the focus in 2024 further pivots towards the rental market, offering a lifeline to those seeking shelter as well as those servicing the housing market.
This paradigm shift in the real estate landscape presents a unique opportunity for real estate professionals. With the for-sale market navigating a precarious juncture marked by compensation lawsuits and affordability concerns, the emphasis in 2024 will be on generating leads and income through other avenues, such as the rental market. Rentals, therefore, will not just help to bridge the gap for agents during challenging times but also serve as an investment into the future for both new and seasoned real estate professionals.
5. Building a fairer financial future toward homeownership
With affordability as the primary concern heading into 2024, tools intended to support greater financial empowerment will continue to gain prominence this coming year. Rent payment reporting is one of the initiatives that will play a more prominent role in fostering a fairer financial future for all participants in the real estate ecosystem.
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 towards a more equitable financial future, additional private sector solutions are likely to emerge in 2024 and become instrumental in facilitating this transformative change.
In summary, the real estate landscape of 2024 is marked by a dynamic interaction of technological advancements, market dynamics and socioeconomic influences. The various trends mentioned above collectively shape a narrative of an industry undergoing constant change. Success in 2024 will hinge on the capacity to embrace change and capitalize on emerging opportunities.
Michael Lucarelli is the CEO and co-founder of RentSpree.
