Don Wenner's Top Six Market Predictions For 2024

Don Wenner's Top Six Market Predictions For 2024

Don Wenner's Top Six Market Predictions For 2024

Don Wenner's Top Six Market Predictions For 2024

As we head full swing into this new year, I’d like to share my 2024 predictions for the housing market, from rents and interest rates, to pipelines and property values, to collections.

Some of these predictions will likely be different than what you are hearing in mass media. At this point, DLP Capital has over 25,000 residences in operation, development, and construction, in addition to another 10,000 residences in our lending portfolio. We estimate over 85,000 residents reside in our properties today. Suffice it to say that these predictions are not just based on personal experience, insights, and foresight—but strong data from our own boots on the ground, so to speak. So here goes my predictions for 2024.

#1 Rents will grow at historically normal rates

I expect the high rent growth that we saw in the last few years, which reached a year-over-year peak of 11.4% in Q1 20221, to subside to a normalized range of 1-3% in 2024. This is a very acceptable range for multifamily portfolios in general and is fully in line with the historical average of 2.2%. A return to the historical average, in fact, points to a return to market stability. The housing market has been on a wild ride the last few years, and it’s no surprise that such rent growth could not be sustained indefinitely. That being said, I expect pockets of stronger growth in many of the markets we focus on, in the Southeast primarily in addition to markets in Texas.

Understand that even through cycles of temperate rent growth, housing investments such as those in our DLP Lending Fund, Preferred Credit Fund, and Building Communities Fund were and are still returning double digits. I’m confident in the continued consistent strong performance of rental housing investments in the years to come, including 2024.

Chart below shows the historical average for rent growth of 2.2% vs. a peak of 11.4%

#2 Interest Rates will decline slightly

My second prediction is that mortgage rates will decline from the low 6s to low to mid 5s. This too, like rent growth noted above, will mark a return to historic normalcy. Yes, we know that many homeowners benefited from mortgage rates of only 3-4% in recent years, but in reality homeowners were somewhat spoiled by those rates, which were an anomaly originating from the 2008 housing crisis. If you look back to about the beginning of this century through 2008, 30-year mortgage rates were in the mid-5s to mid-6s—exactly the levels I expect them to return to. Mortgage rates plummeted largely due to the 2008 financial crisis and an overcorrection in policy in which the Federal Reserve held interest rates at close to zero for an extended period of time. The federal funds rate was, at one point, actually reduced to nearly zero: 0.06%, in 20112. The extreme monetary loosening provided the financial industry a lifeline during that economic crisis, but those days are past—albeit we now have economic woes of a different kind, such as inflation.

In short: I’m extremely confident that the housing industry can thrive with mortgage rates of 5-6%, as it has done during decades of housing booms in the past3.

Primary Mortgage Market Survey

#3 Multifamily oversupply will be absorbed

Some markets will experience short-term oversupply, but I don’t expect that to last for long, and most markets will absorb available rental stock by the end of 2024. Yes, there’s an estimated 440,000 new units coming online this year4. That may seem like a lot to absorb but not when you look at long-term demand. The US is expected to need 4.3 million more apartments by 2035, according to the National Multifamily Housing Council (NMHC). Divide that by the next 10 years, and that’s an average of 430,000 units needed per year. So we’re actually right on target this year—though we’ll need to play catchup when deliveries in 2025 begin tapering off.

Still, while it may seem we’re on target for supply over the long run, not nearly enough deliveries will be workforce rental housing, priced for Americans that serve as the backbones of our communities—teachers, police, health care workers, etc. Increasingly, these critical workforces must turn to rentals as the affordability gap between owning a home versus renting remains at an all-time high. It’s now $1,298 more expensive on a monthly basis to own a home rather than rent a professionally managed apartment, according to NMHC. That’s why I have DLP Capital on course with a multi-year pipeline of new, attainably priced rental housing developments. We have over 8,000 currently in the development and construction pipeline.

#4 New Development & Construction 

Construction starts in 2024 will be minimal due primarily to a dearth of financing. Commercial real estate lenders significantly pulled back on construction lending in the last year, and many closed up shop altogether. The Mortgage Bankers Association expected multifamily lending to finish 2023 with a total decline of $285 billion for the year, a 41% decrease from 20225. That’s an astounding decrease—but with problems come opportunities. Agile lenders with solid resources will be able to capitalize on financing voids in 2024.

Also, in terms of my prediction of minimal construction starts, don’t be confused with the hefty numbers you may hear about multifamily currently under construction in the US—about one million units. Those are units previously underway—mostly begun in 2022. Most of those units will be delivered this year, if not already. Fortunately, in terms of a dearth of financing—and bringing this point home to DLP Capital—we’re flush with capital for strong sponsors with quality projects, and we have a goal of $1.5 billion in rental communities financed in 2024. We’ve positioned ourselves to capitalize on lending opportunities as other lenders are relegated to the sidelines.

In terms of 2024 construction costs, I expect a modest 2-4% decline, following on the heels of a 5-7% decline in the past year.

#5 Property Values

Values will remain flat in 2024. However, if interest rates decline meaningfully (more than my expectation of low to mid 5s) and are expected to continue to decline, I anticipate a lot of capital flowing into the market, which in turn will cause cap rates to decline and values to spike up. If my prediction on rates declining is wrong and that does not happen, we’ll see cap rates increase 50-100 basis point and values decline. In short, the fundamentals are very strong, but interest rates are the one primary factor keeping capital on the sideline and, in turn, keeping values from increasing currently.

#6 Collections

We’ll see an increase in delinquencies in 2024 as many families have depleted their savings, including prior economic impact payments. Lower-income consumers are especially at risk of falling behind on payments. This is a time in which our mandate of housing being affordable for working families is especially important. The threshold of affordability is generally accepted as 30% of gross income going to pay rent. In 2023, we surpassed 50%+ of families now spending over 30% of their gross income on rent, which often means that these residents are going to struggle to make ends meet and rent delinquencies will increase. Our mandate is for 85%+ of our investments to be less than 30% of rent-to-income, with the majority of our communities at less than 25%. This means that our renters can pay their rent because it is affordable. In short, we expect to see a decrease in collections nationally in 2024 of about 1% from the current collections of around 95%.

In summary, where do these six predictions leave us? We still have a housing shortage, and unfortunately for millions of working families that problem is not going away any time soon. Between a dearth of new multifamily construction starts going forward, existing supply being absorbed, and mortgage rates still stymying homeownership, the 2024 rental market will remain strong and performance will be solid. The winning formula, I predict, is to stay the course with housing investments and with a 3-5 year horizon, there is a very strong potential for continued double-digit returns when invested with experienced and disciplined managers.


  1. CoStar Multi-Family National Report, 1/2/2024
  2. Federal Reserve's Policy Actions During the Financial Crisis
  3. FreddieMac: https://www.freddiemac.com/pmm...
  4. CBRE U.S. Market Outlook 2024
  5. MBA Forecast: Commercial/Multifamily Lending
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