Real estate is a rapidly changing industry. Those who stay ahead of the curve can maximize their success.
Exceptionally low borrowing rates combined with limited new construction have kept housing market prices high. However, these conditions are unlikely to continue for long.
Investors can look for a few housing market trends that will impact the future of real estate. These include:
1. The Suburbs Will Remain Strong
Real estate is an asset class consisting of land and the buildings or structures that are built on it. It is a type of investment that is highly sought after due to its many advantages over other investments. Its primary advantage is that it is an asset that can be easily converted into cash, making it a secure source of funding. Real estate also offers many tax benefits. In addition, it is highly dependable and has high returns on equity.
As the economy recovers from the COVID-19 pandemic, new-home buying is expected to pick up speed in 2021 and continue into the future. This is largely due to a combination of factors, including low mortgage rates and a change in buyer preferences. Millennials are increasingly opting for suburban areas due to their preference for walkable neighborhoods and proximity to community resources.
Furthermore, a rising number of millennials are purchasing homes with partners or friends. This is a result of the fact that they do not have enough money saved to purchase a home on their own. Furthermore, they are unable to meet the required down payments of more expensive properties. Consequently, this trend is helping to drive demand for affordable housing.
In addition, emerging technologies are likely to further transform the real estate industry in the near future. For instance, the use of blockchain and cryptocurrency could significantly shorten closing timelines. Other innovations, such as augmented reality, may allow buyers to tour a property without leaving their homes.
2. The Rental Property Market Will Continue to Decline
The real estate industry continues to evolve at a rapid pace, with new software helping buyers and sellers close deals faster, and online listing sites bringing in more informed and engaged property seekers. Additionally, a variety of innovative technologies are changing the way people buy and sell properties, including virtual reality, augmented reality, and blockchain.
As these technologies continue to revolutionize the real estate market, investors need to learn how to leverage them in order to thrive in the new landscape. They must also be able to spot signs of an overinflated housing market and take action accordingly, before the situation escalates.
According to the latest data from property listing site Zumper, rental prices in the US are continuing to fall, with rents now lower than pre-pandemic levels in many areas. The decline in rental property markets may provide opportunities for real estate investors, particularly those who focus on the suburbs.
However, the overall housing market will continue to cool, as mortgage rates rise, and housing construction catches up with demand. This trend is expected to be especially acute in the more expensive markets such as New York City and Austin, where homebuyers are struggling to afford the prices of high-end condos and single-family homes. This is likely to create an opportunity for investors who specialize in buying and selling distressed properties, such as those with liens, probate, or clouded titles.
3. The Housing Market Will Moderate
The housing market will continue to cool, and mortgage rates will rise, but this won’t cause a housing crash. It is normal for hot economies to eventually cool, and when this happens, the real estate market moderates to balance supply and demand.
The high demand for homes due to the COVID-19 pandemic has outstripped home construction, which means there aren’t enough houses available on the market for buyers to purchase. In order for the market to crash, this demand must slow significantly, and that is unlikely.
If interest rates rise too high, potential buyers may decide to wait on purchasing a home or even back out completely. However, if interest rates remain low for an extended period of time, the housing market will continue to strengthen and grow.
As the housing market moderates, landlords and investors will have to adjust their strategies. Renters will become more interested in features that increase energy efficiency, and they will expect amenities beyond just parking and trash pick-up. Investors operating multifamily properties should keep this in mind and be ready to offer new options for tenants.
As the housing market continues to change, it is essential for real estate investors to stay informed of the trends. This way, they can prepare for future challenges and take advantage of upcoming opportunities. With a little research and a lot of mentorship, real estate investors can make wise choices that will lead to success for decades to come.
4. The Multifamily Market Will Change
As the economy rebounds, renters will probably want to buy homes and move out of apartments. However, this could be difficult with higher home mortgage rates and increased economic uncertainty. Consequently, apartment rental demand will likely remain strong in 2023, especially in urban areas. In addition, millennials’ changing work-life balance priorities are expected to continue fueling demand for hybrid offices and coworking spaces.
Additionally, the multifamily market may see some distress as mortgages on properties that were pre-change to New York’s rent laws expire this year. As a result, the apartment market might experience slower transaction volume and lower pricing than last year.
If the Federal Reserve continues its policy of raising interest rates to tame inflation, it could cause the real estate market to moderate and prevent a housing crash. Nevertheless, investors who pay close attention to local, state, and national trends will be able to avoid the risks of overvaluation.
More seasoned real estate investors know that the industry is constantly evolving. In order to stay ahead of the competition, they need to invest time and money into research and education. This way, they can gain an in-depth understanding of the latest market trends and how to take advantage of them. Also, they should seek advice from mentors and peers to improve their investment strategies.