As we bid farewell to 2023, it's time to reflect on the dynamic landscape of the multi-family real estate market over the past year and look at real estate market trends for 2024. The Fed has been battling inflation since mid-2022, resulting in higher interest rates on residential and commercial loans [1]. This situation made the market less attractive to buyers, contributing to limited inventory and higher home prices. But what does this mean for the future and investment opportunities in 2024?
Steadfast Federal Interest Rates: Implications for the 2024 Multifamily Market
Most notably, the market has reacted to the federal interest rate inching its way up to around 6% after years of low to almost zero percent rates [2]. The Fed kept the federal-funds rate unchanged lately. The rate currently stands at a target range of 5.25%-5.50%, following 5 percentage points in hikes implemented from March 2022 to July 2023
Borrowers accustomed to low rates find the idea of borrowing at six to eight percent daunting. However, signs indicate that these rates may persist through the first half of 2024 {3}. Even reports suggesting key economic indicators may lead to the Fed lowering rates as early as Q2, reflected in a recent slight dip in rates, show an economy eager for lower rates. Investors who are savvy and willing to “marry the investment but date the rate” in the current environment are optimistic about refinancing opportunities in the near future.
Limited Inventory Challenges:
Traditional buyers are finding it challenging to locate good investments, ESPECIALLY IN THE Northeast Region. Yet, opportunities exist for investors who explore off-market deals or partner with agencies seeking property owners not previously considering selling . As property taxes and insurance costs continue to climb profitability margins will tighten, potentially increasing future inventory as owners who aren't actively managing their investments might not see a desirable return and opt to cash out. Investors with financial fortitude and a strategy for optimizing performance will find opportunities waiting.
In a sellers' market, creative strategies are key for investors [4]. Beyond tactics like waiving inspections, buyers are expediting closings by offering cash instead of waiting on traditional financing. While not all investors have ready capital, partnering with hard-money lenders for short-term loans can be the key for securing investments while arranging traditional financing. Now, more than ever, thinking outside traditional lanes is essential to to remain competitive in this highly competitive market.
Despite the challenges in the cost of money and lack of inventory, the Northeast continues to show resilience for investment. Unlike other regions, the Northeast did not experience a surge in new construction. The limited inventory and higher rates have led to more people remaining renters, waiting out the economic challenges. And while other markets talk about strategies for attracting renters, improving tenant retention, the Rhode Island and Southeast Massachusetts rental markets remain strong with low vacancy rates [5]and consistent year-over-year rent increases . Investors with a long-term perspective can expect steady growth in their portfolios.
The Good News
Despite the challenges in the cost of money and lack of inventory, the Northeast continues to show resilience for investment. Unlike other regions, the Northeast did not experience a surge in new construction. The limited inventory and higher rates have led to more people remaining renters, waiting out the economic challenges. And while other markets talk about strategies for attracting renters, improving tenant retention, the Rhode Island and Southeast Massachusetts rental markets remain strong with low vacancy rates [5]and consistent year-over-year rent increases . Investors with a long-term perspective can expect steady growth in their portfolios.
Predictions for the 2024 Multifamily Real Estate Market
The multi-family real estate market in 2024 is set for continued evolution, demanding adaptability from investors. While the trajectory of federal interest rates remains critical, the outlook shows signs of improvement. Current challenges present opportunities for those agile enough to embrace the changes required for successful investing.
Paving Your Path to Successful Investments
Are you navigating the intricate waves of the real estate market? Whether you're looking to expand your portfolio or step into new investment territories, Stonelink Property Management is your compass in this journey. We don't just manage properties; we cultivate investment dreams into success stories. If you're eyeing opportunities in Rhode Island or SE Massachusetts and need some guidance, let's start a conversation. Connect with us for a complimentary consultation. At Stonelink, it's not just about properties – it's about possibilities. Let's explore how your vision can flourish with our expertise and passion for real estate investing.
References:
- [1] Federal Reserve Economic Data, 2023. https://fred.stlouisfed.org/series/CREACBW027SBOG
- [2] Federal Reserve Bank, Federal Funds Rate, 2024 https://www.newyorkfed.org/markets/reference-rates/effr
- [3] The Real Economy, 2023 https://realeconomy.rsmus.com/fed-signals-end-of-rate-hikes-and-projects-cuts-in-2024/
- [4] Fast Expert, 2024 https://www.fastexpert.com/blog/how-to-make-a-home-offer-more-attractive/
- [5] Rental Vacancy Rate, November, 2023. https://ipropertymanagement.com/research/rental-vacancy-rate
