According to this prediction, in an optimistic scenario (assuming no major macroeconomic changes), housing prices in the remaining time of 2023 and 2024 will continue to rise slowly at a normal pace, as shown in Figure 2. Here, “normal pace” refers to the growth rate before the pandemic, or in other words, the rate during non-pandemic periods. So, for those “experts” who want to “time the market,” they have already missed the winter adjustment phase (often referred to as the bottom-buying opportunity). According to the predicted range provided by the model, compared to the middle of 2023, the range of housing price index changes by the end of 2023 is between -2% and 9%, with a midpoint of 3%, which means an average increase of around 3%. By the end of 2024, the housing price index change ranges from 6% to 21%, with a midpoint of around 13%. It’s worth emphasizing that these predictions are made within the framework of an optimistic scenario compared to the middle of 2023. This level of predicted increase is actually quite high; in normal years before the pandemic, the average annual increase was about 5%. Lao Shao feels that the 2024 forecast range is somewhat aggressive, so depending on the Federal Reserve’s interest rate hikes, it may need to be updated at the end of this year. The pessimistic scenario, which involves major macroeconomic changes like a severe economic recession, would result in a different prediction curve. You can find more information about this model’s predictions on Lao Shao’s viewing channel.

What about the current market conditions and future trends in the rental market (single-family and multifamily), especially regarding rental increases, which is a concern for investors? Since the Fed raised interest rates and there has been an increase in the supply of rental units since last year, many areas in the Sunshine Belt have also seen rental adjustments, as analyzed in previous videos on Lao Shao’s viewing channel. Here, let’s take a look at several markets that our ACMG Capital team is monitoring: Dallas, Tampa, Orlando & Central Florida, Ocala, and Sarasota. Most of these are thriving markets, with long-term stable growth trends, while Ocala is considered an emerging market with huge potential but relatively higher risk.

As evident from the rental rate comparison in Figure 3, these regions saw significant rental increases during the COVID period, but after the interest rate hikes, there were adjustments, meaning rental decreases, with varying degrees of adjustment in each region. Are these adjustments complete, or will they continue to decrease? Let’s look at Figure 4, which shows the year-over-year trend in rental rate changes. Based on the slope of this curve, intuitively speaking, the overall market increases in these regions are not likely to be significant in the coming year; they may remain flat, conservatively estimated to fluctuate around 0% (until the adjustments return to a normal market state, where average annual increases of 3%-5% can be expected). Conservative predictions are important because for investments, especially in large apartment complexes, rental growth forecasts can have a significant impact on underwriting. Overly optimistic predictions can make the overall return rate look too good to be true, potentially leading to incorrect investment decisions. Note that these predictions are at the overall market level. A significant portion of how much rent can increase for an apartment building depends on how much value the project team can add through management, i.e., adding value. So, from an investment perspective, the increase in rent for a specific project can be broken down as follows: x% + y%. Where x% is the market-level increase, and y% is the increase brought by the project team’s operation. The greater the project team’s management ability, the easier it is for y% to be larger. Of course, these market-level predictions are just simple intuitive estimates. Like the sales market, there are many factors that influence the rental market, and different factors working together on rents can yield different predictions. For those interested, you can have a detailed discussion with the ACMG Capital team.