Welcome, dear enlightened house hunters, sellers, buyers, and investors! Today, we’ll explore how you can navigate the tricky waters of the 2024 real estate market and other profitable investments. At first sight, this year doesn’t treat those who intend to put their money into financial plans or properties too kindly.
Indeed, inflation, high property prices, a housing shortage, and climbing interest rates are powerful roadblocks, curbing our enthusiasm. But fear not! We’re here to keep you informed and ahead of the curve. With us, you can dodge the bullet of rising interest rates and make ends meet! So, let’s dive in!
Table of Contents
- Real estate investment prospects in 2024
- Which are the best investment properties in 2024?
- Best alternative investment trends for 2024
Real estate investment prospects in 2024
You know we love real estate. For this reason, we still consider it one of the most (best?) recession-proof and lucrative investments for veteran and rookie investors. Apparently, however, all odds are against investment in real estate properties. Let’s look at the “insurmountable” obstacles the American housing market faces in 2024!
Inflation and high property prices
International inflation is the greatest sneaky villain, raising the prices of almost everything. Homes are no exception. As inflation creeps up, your dollar doesn’t stretch as far. This depreciation means the cost of buying or renting a home shoots up, too. According to Zillow, a 4.6 percent increase occurred in US home prices between March 2023 and March 2024.
In 2024, homeowners and potential buyers are feeling the pinch. Higher costs can damper your plans. But keep hope. With a few clever tactics, you can still find a home that fits your budget.
You can always find a hidden gem sold under the median market price. However, you’ll need to locate them first and (probably) make some concessions (like pouring money into a DIY facelift). The most efficient and streamlined way to uncover these is by contacting real estate agents directory members. At the top of their game, these pros have delivered their clients the best deals for over 20 years!
Housing shortage reaches new heights.
The housing market is tighter than a drum these days. With more folks needing (affordable!) houses and condos than homes available, it’s a classic case of supply and demand. According to National Public Radio, the US housing market lacked between 4 and 7 million units in April 2024. No wonder this acute housing shortage keeps prices high and can make the hunt for a new place a little hectic, to put it mildly.
But remember, patience is a virtue. Keep your eyes peeled, and don’t rush into the first deal that comes your way. You can still find homeowners pressed by time to sell. With the right negotiation tactics, you can go under the initial price. Sometimes, the best opportunities arise when you least expect them.
Climbing interest and mortgage rates
Here’s the biggie: interest and mortgage rates are climbing like weeds. Suppose you want to finance your first home and borrow money from a lender. Then, prepare to pay more in interest. Rising interest rates can increase your monthly mortgage payments and overall home-buying costs.
But to what extent have interest and mortgage crawled up to frighten us? As of May 1, 2024, the Federal Reserve, to our chagrin, announced they would keep the interest rates at their present level (23-year high) between 5.25 and 5.5 percent.
Let’s dive into the numbers!
The average interest rate for a thirty-year fixed mortgage is currently 7.02 percent. If you’re considering a 30-year refinance plan, expect the interest rate to be 7.03 percent. The US average interest rate for a 15-year fixed refinance plan is 6.50 percent (source: Bank Rate as of May 20, 2024). These figures will help you make educated decisions about your refinancing options.
What did all these rising interest rates lead to? In Q2 2024, the American real estate market continues to be slow. Homeowners haven’t “flooded” the market with signs advertising homes for sale. Why would they? They wouldn’t benefit from the same excellent interest rates as a few years before.
Which are the best investment properties in 2024?
We are all for the best starter properties for investment in 2024. The truth is that commercial properties like office buildings, self-storage, industrial properties, and tinier residential valuables like vacation homes have never ceased to be highly profitable. You can combine residential with commercial (why not?). Yet, they need a financially more intelligent approach in 2024.
Nonetheless, if we had to pick two of our all-time favorites, we would purchase single-family homes and residential rental units. These two will likely stay the same because demand continues to grow across the States while the inventory is still low.
Why buy single-family residences?
Owning your place provides a sense of stability. You’re not at the mercy of landlords or fluctuating rental markets. Secondly, real estate generally appreciates over time. Even if prices dip temporarily, they typically bounce back. Your home could be worth significantly more in ten, twenty, or thirty years.
Furthermore, homeowners are eligible for a range of tax benefits. Deduction on mortgage interest? Check! Lower property taxes? Double check! These can substantially reduce your overall tax liability, making homeownership a smart financial move.
The rental market still (rocks and) rolls!
Do you see phantasy in the rental market? You should! Right off the bat, homeownership remains a dream too far for many Gen Zers. Renting an apartment will be the only solution for young people residing in pricey metro areas with high living costs. This tendency has resulted in increasingly competitive rental markets nationwide during the last few years.
However, the high cost of purchasing and owning a home may drive sustained or increased demand for rentals in the foreseeable future. Rental properties are among the many popular real estate assets allowed in self-directed IRAs. Additionally, they can generate continual passive income for investors. Plus, you can enjoy tax deductions as a rental property owner!
Best alternative investment trends for 2024
Keeping valuables in cash was trending in the first three quarters of 2023. This shouldn’t surprise anyone because skyrocketing interest rates affected existing Treasury Bills and high-yield savings accounts. However, by the end of the year, things seemed to normalize. With interest rates lowering, the yield on newly issued T-Bills increases to stay competitive with other fixed-income investments.
Should you take your money to Wall Street?
Analysts declare that the stock market should be one of the safest routes for investors. Nasdaq’s price increased 43 percent in December 2023. Will the stock market make a glorious comeback?
Among the companies that gained the most, insiders have dubbed them ‘The Magnificent Seven.’ These firms, including Apple, Amazon, Alphabet, Nvidia, Meta Platforms, Microsoft, and Tesla, have proven their stability and resilience in the market. Despite some fluctuations, Apple and Google remain some of the safest bets. Even Tesla, which experienced a 25 percent drop in Q1 2024, is expected to bounce back, further solidifying the stability of these companies.
Why are bonds reliable again?
Bonds can be a reliable investment option amidst rising interest rates. Long-term investors with fixed incomes can benefit from interest rates artificially kept high by betting on bonds. Market specialists suggest American bonds will make a spectacular comeback, reaching a nominal annualized 4.8 percent to 5.8 percent (instead of the max. 2.5 percent expected before the interest rate increase) in the next ten years. This reassurance should infuse confidence in your investment decisions.
We recommend examining your investment options in the 60/40 portfolio. What does this imply? You take 60 percent of your wealth and invest it in equities. Simultaneously, you go with bonds for the remaining 40 percent! Thus, you can lessen financial risks and generate a profit even in a volatile market. However, you shouldn’t expect considerable returns in the short run! That’s why they call these bonds fixed-income assets.
What type of bonds are we speaking of?
You can’t go wrong by investing in exchange-traded funds (ETFs), which mix stock flexibility with mutual fund diversification. Additionally, mutual or individual funds are top choices for investors swimming against rising interest rates. The good news is that some of their yields exceed even T-Bills’ returns, currently sitting above 5 percent. As of January 2024, the Morningstar specialists rated BBH Limited Duration BBBIX as the most appealing of their top-rated short-term bond funds with a 4.8 percent return.
By investing in this, you’d be in the somewhat risky business of getting into asset-backed securities and bank loans. Yet, suppose you wish to reduce risk and gain a decent return. In that case, the established news site recommends Pimco Enhanced Short Maturity Active ETF MINT, yielding about 4.62 percent.
Are savings accounts worthy of your attention in 2024?
Surprisingly, interest rate hikes have kept the most desirable savings account intact. Most still retain a 5 percent APY. On the other hand, keeping your money in Treasury-Bills, backed by FDIC (Federal Deposit Insurance Corporation), will earn you an over 5 percent yield.
Final thoughts
The investment landscape in 2024 is a challenging feat, especially with rising interest rates and economic challenges. Yet, opportunities abound for those willing to look closely and think critically. Despite the hurdles — from inflated property prices to severe housing shortages — real estate remains a steadfast choice for many.
Single-family homes and rental properties continue to shine, offering stability and potential growth. There’s a catch, though. Without a real estate agent’s reliable assistance, I wouldn’t join the intricate world of real estate investments. In 2024, the perils of failure and going bankrupt outweigh the chances of success.
Moreover, don’t shy away from exploring the stock market and bonds. The ‘Magnificent Seven companies and the promising outlook on bonds suggest these deserve a second chance. And let’s remember the trusty savings accounts and T-Bills that still offer solid returns. The potential of these investment avenues in 2024 should pique your interest.
The key to thriving in 2024 is to remain informed, flexible, and patient. With the right strategy and a bit of savvy, you can transform these challenges into rewarding opportunities.
