• CoStar predicts a 25% reduction in new rental units coming online in 2024.
• This pullback is due to various market factors, including saturation of the market in large cities and rising construction costs.
• Some areas are more severely affected, with larger cities like New York and Chicago experiencing significant slow-downs.
• This may lead to more competitive rental markets and potentially higher rental rates.
• However, depending on economic conditions, this decline may not necessarily result in increased profits for property owners.
• CoStar suggests investors might turn their attention to secondary markets where there is less market saturation.
This Just In: CoStar Predicts Apartment Drought in 2024
Fewer New Buildings to Hit the Rental Market
- According to our oracle of the property world, CoStar Group, there’s a whopper of a change coming down the pipe in 2024. They’re predicting a 25% reduction in the number of new rentals coming online, turning the tap off the recent flood of apartment availability. Even Noah would be impressed by this pullback.
- Why this sudden change? Here’s your alphabet soup: NYC, LA, CHI. Over-saturation in urban areas has developers putting their bulldozers in park, and skyrocketing construction costs are not helping matters.
Higher Rents on the Horizon? Only Time Will Tell
- It’s easy to draw the conclusion that less supply equals higher rent prices. However, that’s not always how the cookie crumbles. Economic conditions, such as employment rates and inflation, will be the real fortune tellers here. So, don’t jump to conclusions (unless you’re into rental price cliff-diving).
Investors, Buckle Up! Secondary Markets Could Be Your New Playground
- Opportunity might just be knocking on your door, investors. CoStar is hinting at a possible redirection to secondary markets. Smaller towns, traditionally overlooked, may become the latest “it” zones in property investment. So lace up your boots and get ready to explore new territories!
In classic sitcom fashion, where one door closes, a window always seems to pop open. Yes, the rental world may be going through a bit of a dry spell in 2024, but this doesn’t mean it’s time to abandon ship. In fact, investors might finally get to break free from the concrete jungles. And renters, remember, the crystal ball is murky on rent prices. So, don’t start penny-pinching on your latte delights just yet. This Hollywood-level plot twist in real estate’s storyline sure ensures one thing, folks: the show must—and most certainly will—go on!
Original article: https://www.inman.com/2024/01/12/apartment-starts-hit-a-40-year-high-in-2023-dont-expect-a-repeat/
