Evaluating the 2024 Real Estate Landscape
A SWOT Analysis
By Erica LaCentra
The real estate market is a dynamic, ever-changing industry. As we get into 2024, it is important to understand the current state of the real estate market to identify where the greatest opportunities exist.
To better analyze the real estate market, it can be useful to utilize a SWOT analysis. As a tried-and-true strategic planning tool, it can provide insights into the strengths, weaknesses, opportunities, and threats that exist within the space. This information can help investors and real estate professionals better plan out their strategy for the upcoming year and help them determine where to focus their attention to be more successful in their endeavors.
Strengths
Although 2023 was a challenging year due to rising interest rates and overall rising costs, the outlook for 2024 is proving to be more optimistic. One of the biggest strengths that the real estate industry has going for it is there continues to be stable demand. Property listings in 2023 hit record lows which exacerbated supply problems throughout the year. This pent-up demand will extend into the coming year, and with homeowners finally accepting that mortgage rates will not be dropping any time soon, there are predictions that more homes will likely hit the market in 2024. This signals good news for homebuyers and a positive outlook for the real estate market overall.
Another strength for the industry in 2024 is predicted stability regarding rates and home prices. While opinions may differ on whether the Fed will raise interest rates or cut them, there is a general consensus that whatever the Fed decides to do, it will likely not make any major increases or decreases to the federal funds rate. Because there are no predicted major fluctuations, the real estate industry can finally start to enjoy a bit of stability rather than weathering the volatility that it experienced in 2023 due to the Fed repeatedly raising rates over the year.
With stable rates or minimal adjustments, there are sentiments that home prices should mostly stay steady in 2024 with the prediction of prices falling only around 1%. This bodes particularly well for the industry as we do not expect to see any major price drops which could shake up the space.
Weaknesses
Although overall sentiments continue to be optimistic for the upcoming year, the real estate industry still has several weaknesses that professionals should be aware of that could throw a wrench in their planning. First and foremost, affordability issues will continue to be one of the greatest weaknesses that the industry will have to face. Even with rates stabilizing, increased home prices plus higher rates still put many homebuyers in a place where homeownership is out of reach. Especially for first-time buyers, as property values have outpaced income growth and overall expenses continue to rise, there is a significant barrier to entry for this group.
Even in the rental market, concerns of increasing costs such as insurance and taxes, can put a burden on landlords as expenses could potentially outpace rental income.
Another weakness for the real estate industry is general economic uncertainty. Any economic volatility, such as the ongoing geopolitical tensions we are seeing, can impact investor confidence. Also, general uncertainty in current economic conditions can lead to hesitancy by individuals making any major investing or purchasing decisions which could have a large effect on the real estate industry.
Opportunities
For upcoming opportunities in the real estate space, professionals should focus on leaning into the strengths that have been identified. Specifically, capitalizing on the pent-up demand that has existed for well over the past year. A favorable shift has been predicted for buyers in 2024 due to small decreases in home prices paired with predictions of increases in new listings, which means there will be no shortage of individuals finally looking and hopefully able to buy a home.
Also, in places where home prices have soared, there are predictions of homeowners looking to cash out on their equity to move to more affordable areas of the country.
Another area of opportunity that real estate professionals can capitalize on due to lack of inventory is tapping into new construction. With demand for housing in most areas of the country, new construction in any form, whether it be building large-scale developments or scatter site developments will be one of the top solutions that professionals can lean into, and this area of the industry is predicted to have a boom in the coming year. As inventory still struggles to catch up to demand, the best suggestion would be to create your own.
Threats
In a space like the real estate industry, there will always be threats that professionals should be aware of and factor into any planning they are doing for the coming year. One of the biggest threats in the coming year is likely the threat of a global economic downturn. The real estate market especially can be detrimentally affected by a broader economic downturn as it affects both demand and financing in the space.
As we continue to see problems with inflation and reduced consumer spending, there are concerns about a slowdown in the real estate market despite factors that seem to position the space for a most positive upcoming year.
Another major threat in the real estate industry is concerns of regulatory changes. Rumblings of regulatory changes such as zoning laws, rent control discussions to ensure affordable housing, and even commission structures for agents, may create a challenging environment across the industry that could severely hinder any potential progress that could be made in the coming year.
Beyond the SWOT Analysis
While there are challenges and uncertainties in the real estate market for the coming year, this analysis can help provide a general framework that can be used by real estate professionals to better navigate the complexities of the space. Real estate professionals should view this tool as a way that they can leverage strengths, address weaknesses, capitalize on opportunities, and mitigate threats to better plan their path for success in 2024.
