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Sunbelt’s Promising Real Estate Outlook in 2024: Insights and Predictions

Written by Princi Gill | Jan 3, 2024 2:30:00 PM

As we step into 2024, the real estate landscape in Phoenix, Arizona, a jewel in the Sun Belt region, presents a mosaic of opportunities and challenges. Driven by substantial population growth and evolving market dynamics, the Phoenix-Mesa-Scottsdale area continues to attract attention from investors and home buyers alike. This article delves into the multifaceted nature of Phoenix's real estate market, offering a glimpse into what 2024 holds for potential and existing investors, particularly in the multifamily housing sector.

U.S. Markets To Watch in 2024

Phoenix ranked #2 in the overall Real Estate Prospects according to ULI 2024 report

Overall Real Estate Prospects
1 Nashville
2 Phoenix
3 Dallas/Fort Worth
4 Atlanta
5 Austin
6 San Diego
7 Boston
8 San Antonio
9 Raleigh/Durham
10 Seattle
11 Houston
12 Denver
13 Charlotte
14 Miami
15 Northern New Jersey

Source: ULI emerging trends in real estate 2024.

Homebuilding Prospects
1 Austin
2 San Antonio
3 Washington, DC
4 Atlanta
5 Dallas/Fort Worth
6 Charlotte
7 Houston
8 Raleigh/Durham
9 Tampa/St. Petersburg
10 Denver
11 Seattle
12 Phoenix
13 Inland Empire
14 Washington DC- Dist.
15 Sacramento

Source: ULI emerging trends in real estate 2024.

The Evolving Landscape of Multifamily Residential Housing

Multifamily residential housing, a key component of Phoenix's real estate market, has demonstrated resilience and adaptability in the face of changing economic conditions. Amidst strong population growth and a persistent shortage of housing supply, this segment has proven to be a recession-resistant belt. 2024 brings a mix of headwinds and opportunities, with multifamily housing navigating through challenges like rising mortgage rates and economic uncertainties, yet buoyed by robust long-term demand drivers.

ULI Emerging trends in real estate 2024 Marketing Categories

 Main Group Subgroup Markets

Magnets

Super Sunbelts

Atlanta
Dallas/Fort Worth
Houston
Miami

Phoenix

San Antonio

Tampa/St. Petersburg

18 Hours Cities

Charlotte
Denver
Fort Lauderdale
Minneapolis

Portland, OR
Salt Lake City

San Diego

Supernova

Austin
Boise
Jacksonville

Nashville

Raleigh/Durham

The establishment

Multitalented Producers

Chicago
Los Angeles

San Jose
Seattle

Knowledge and Innovation Centers

Boston
New York-Manhattan

San Francisco
Washington, DC-District

Major Market Adjacent

Inland Empire
Jersey City
Long Island
New York-Brooklyn
New York-other boroughs
Northern New Jersey

Oakland/East Bay
Orange County

Washington, DC-MD suburbs
Washington, DC-Northern VA
West Palm Beach
Westchester, NY/Fairfield, CT

Niche

Boutique Markets

Chattanooga
Des Moines

Greenville, SC
Knoxville

Omaha
Portland, ME
Richmond

Eds and Meds

Baltimore
Columbus
Gainesville
Madison

Memphis
Philadelphia
Pittsburgh
Tallahassee

Visitor and Convention Centers

Cape Coral/Fort Myers/Naples
Charleston
Deltona/Daytona
Honolulu

Las Vegas
New Orleans
Orlando
Virginia Beach/Norfolk

Backbone

The Affordable West

Albuquerque
Sacramento
Spokane, WA/Coeur d'Alene, ID

Tacoma
Tuscon

Determined Competitors

Birmingham
Indianapolis
Kansas City, MO

Louisville
Oklahoma City

Reinventing

Buffalo
Cincinnati
Cleveland
Detroit

Hartford
Milwaukee
Providence
St. Louis

Source: Nelson Economies
Note: Bold type indicates the top 20-highest rated markets for overall real estate prospects

Phoenix's Market Resilience and Future Prospects

Despite the day-to-day challenges, such as fluctuating property values and rental rates, the multifamily sector in Phoenix has shown remarkable resilience. Over the past decade, rent growth in the region has been impressive, with some markets witnessing increases of up to 100 percent. The affordability crisis and the resulting demand for rental units further underscore the sector's stability and growth potential.

In the Phoenix-Mesa-Scottsdale area, a steady rise in home prices is anticipated, with a projected increase of 3.2% by September 2024. This growth trend underscores the area's attractiveness for homebuyers and investors. While the market is expected to stabilize, it's crucial to stay attuned to potential price adjustments and the sustained demand driven by factors like the robust job market and lifestyle amenities.

 

Average Ranks by Market Category: 2024 Versus 2023

(Highly scores are better, scale of 1 to 5)

Group Subgroup Average Rank

Average Change in Rank

Change 2023-2024

Percentage of markets in category

2024 2023 % That Moved Up % That Stayed Even % That Moved Down
Magnets Super Sun Belt 3.35
 
3.56  -0.21

14%

0%

86%

 

18-Hour Cities

3.09
 
3.19  -0.10

14%

0%

86%

 

Supernovas

3.18
 
3.40 -0.23

0%

0%

100%

  All Magnets 3.21   3.38 -0.17

11%

0%

89%

The Establishment

Multitalented Producers

3.11

3.16 -0.05

0%

0%

100%

 

Knowledge and Innovation Centers

 2.99
 
 3.12 -0.13

0%

0%

100%

 

Major Market Adjacents

2.90   3.04 -0.13

0%

0%

100%

 

All Establishments

2.96  3.08  -0.12

0%

0%

100%

Niche

Boutique

2.37  2.53  -0.16

0%

0%

100%

 

Eds and Meds

2.46  2.63  -0.17

0%

13%

100%

 

Visitors and Convention Centers

 2.57  2.74 -0.17

0%

0%

100%

 

All Niche

2.51 2.68  -0.17

0%

6%

100%

 

The affordable west

2.22  2.33 -0.11

20%

0%

100%

 

Determined Competitors

2.60  2.68  -0.07

0%

0%

100%

 

Reinventing

 2.30 2.42 -0.11

25%

0%

100%

 

All Backbones

 2.36 2.46 -0.10

15%

6%

100%

All Market

 

2.74  2.89 -0.14

6%

1%

100%

Source: Emerging trends in real estate surveys, compiled by nelson economies

Challenges and Opportunities in the Multifamily Sector

The multifamily market isn't without its challenges. Rising operational costs and insurance premiums, coupled with constrained debt availability, could impact future supply growth. Nevertheless, the sector's liquidity remains higher than other property types, indicating a degree of resilience amidst these challenges.

Institutional Investors' Shift in Focus

Amidst the changing real estate landscape, institutional investors are re-evaluating their investment strategies. The multifamily sector in Phoenix and the broader Sun Belt region emerges as a favored option, replacing traditional investments like malls and office buildings. This shift underscores the sector's stability and growth potential in the current market scenario.

  • Anticipated Home Price Growth: By September 2024, home prices in the Phoenix region are projected to rise by approximately 3.2%. This forecast indicates an ongoing upward trend in the housing market, presenting an optimistic scenario for prospective homeowners and investors in Phoenix.
  • Expected Market Equilibrium: The Phoenix housing market is anticipated to reach a state of balance, with home price growth becoming more consistent and less volatile. The recent notable decrease in prices is likely a sign of the market adjusting to a more stable state.
  • Possible Price Fluctuations: As the market finds its footing, localized price variations might occur. These fluctuations will likely be shaped by economic factors, fluctuating interest rates, and the availability of housing in specific areas.
  • Persistent High Demand: The Phoenix area is expected to continue attracting homebuyers, bolstered by its strong job market, favorable climate, and appealing lifestyle options. This enduring interest in Phoenix homes is set to support and maintain property values.
  • Durability of the Market: Phoenix's real estate market has demonstrated an ability to withstand diverse economic pressures. While a market downturn is not anticipated,it's important to recognize that economic shifts and unforeseen developments could impact the market dynamics, necessitating ongoing vigilance.

As we navigate through 2024, the real estate market in Phoenix presents a landscape rich with opportunities, underscored by its enduring appeal and robust market fundamentals. For investors and homebuyers alike, understanding these evolving dynamics is crucial to making informed decisions. In Phoenix's real estate market, the promise of growth and stability remains a beacon for those seeking rewarding investment opportunities in the multifamily sector.

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