Despite the challenges ahead, making informed decisions can lead to good returns in 2024.

In the dynamic landscape of real estate investing, 2024 presents both challenges and opportunities. Despite economic uncertainties like surging mortgage rates, fluctuating housing prices, and low inventory, the real estate market remains a gateway for first-time and small-scale investors to build generational wealth and contribute to local community revitalization.

Charles Goodwin, a seasoned single-family rental investor and senior director at Kiavi, emphasizes the importance of recognizing smart long-term investments and developing realistic exit strategies. Looking ahead to 2024, Goodwin identifies five key trends that investors should consider.

1. Resilience of Fix-and-Flip

Despite housing affordability reaching historic lows and mortgage rates soaring, the fix-and-flip market persists. Goodwin notes robust demand, making it an attractive investment.

“Professional fix-and-flippers have been doing very well in 2023, which is something that many people who aren’t in the real estate investing business may be surprised to hear,” said Goodwin. “But the reality is that low inventory in the resale housing market still allows a flipper to gain returns on their investment if they have a good product.”

2. Steady Mortgage Rates

With 30-year fixed mortgage rates exceeding 8% in 2023, the market is expected to slow down. However, Goodwin views this as an opportunity for smarter long-term planning and decision-making.

“There are still enough buyers out there to support the low inventory and move product,” he said. “Mortgage rates remain steady and slow, but it is still a better market overall than it was at the tail end of 2022. You’re not seeing inventory rise quickly or prices drop as deeply.”

3. Long-Term Benefits of Single-Family Rentals

Despite challenges such as escalating property taxes and insurance rates, patient investors in the single-family rental market can reap rewards. Profit margins on median-priced properties increased to 59% in the third quarter of 2023, highlighting the stability of single-family rentals as investments against inflation.

4. Strategic Location Choices

Location remains crucial for real estate investments. Emerging markets in the Sunbelt and Midwest offer favorable outlooks compared to pricier Northeast and West Coast markets. Goodwin suggests exploring under-the-radar tertiary cities. He highlights Memphis, San Antonio, and New Orleans for their high year-over-year for-sale inventory.

5. Untapped Potential in New Construction

Investors should not overlook the opportunities in new construction. Despite declining margins, the National Association of Home Builders predicts an increase in single-family production from 744,000 units in 2023 to 925,000 in 2024.

“Large rebuilders have been doing extremely well in 2023 due to their ability to buy down mortgage rates to maintain sales volume,” said Goodwin. “When a builder can offer someone a rate of 5.75% in the new market, compared to a 7.75% rate in the resale market, it’s easy to see why home builders are doing really well right now.”

Goodwin reassures investors that despite challenges, making informed decisions can lead to excellent returns. Transaction slowdowns do not signify a dead market, emphasizing the importance of research, resilience, and staying focused on long-term goals. Goodwin encourages aspiring investors to view the current situation as an opportunity to build a resilient business capable of withstanding any challenges. •

Categories | Article | Market & Trends

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