Published on April 6th, 2022
Research shows that the worldwide real estate market will grow from $3741.06 billion in 2022 to $5388.87 billion by 2026. The market is growing at a 9.6% Compound Annual Growth Rate (CAGR).
Though the real estate market price isn’t going to grow rapidly like in 2021, that doesn’t mean there are no opportunities for investors. 2022 might bring many more opportunities for savvy investors than the past year.
There are more emerging real estate investment trends we expect to experience this year. Experts also predict that the federal reserve may raise interest rates twice by 0.25%.
The feds’ direction will determine home price growth and real estate investment trends. Regardless of the economic considerations, here are 11 real estate investment trends for 2022.
1. Rising Home Prices
Current real estate trends interconnect. Since there is an increase in demand for single-family homes and a declining supply, prices are shooting up in 2022.
After the pandemic, the real estate market reversed course for a while. Prices were down, and people who wanted to sell reevaluated their decision.
But, prices were up after a few months. High prices are not putting off home buyers. We see some buyers paying above the asking price to acquire their purchase.
The rise in home prices pushes up the home equities of the current homeowners. Home equity is the home value minus the cash owed on it. Home equity, therefore, increases with home value.
2. Slim Pickings For Real Estate Buyers
Inventory, also known as the total number of unsold houses, is incredibly low! In November 2021, inventory was down just over 16% compared to the previous year.
The dip in inventory is because more people want to buy right now, but fewer sellers list their houses for sale. Since there were not many houses for sale over the year, meeting buyer demand was harder.
Due to the low inventory, you have to be on your toes whenever you go house hunting. That’s so because people will snatch up homes fast.
We saw that by the end of 2021, it only took 47 days for homes in the real estate market to sell. That is around 10 days less than the previous year.
The trend will continue in 2022, and we will see homes selling even quicker. But, if you want to buy a home in the slim market, you need to sacrifice some wants and adhere to real estate strategies.
You can decide to purchase the least expensive house in a good neighborhood and upgrade over time. Here, you can decide on flipping houses as a business.
For sellers, low inventory means there is less competition. You will receive many offers on your property, and it’s your task to choose the highest and most suitable one.
3. Movement From Cities To The Suburbs
The pandemic fueled the movement from major cities to the suburbs. We expect big metro areas like DC, New York, and San Francisco to rebound post-pandemic.
But, experts predict that the migration trend out of big cities may persist for up to 5 years. Necessity and choice are the two reasons for the shift.
Those who can’t afford it will move out of necessity, and the wealthy will relocate out of choice. Anyone who lost jobs due to the pandemic can’t afford big city prices.
So, they move in search of affordable housing options. Also, those in the suburbs enjoy cheaper housing and rent prices and lower taxes.
Some of those migrating from cities want suburbs that retain a part of the big city feel. We know such suburbs as “middle neighborhoods.”
The predominant feature of “middle neighborhoods” is their single-family homes. The areas also have the convenience of big cities. There are conveniences like good public transportation, shopping, multifamily housing options, and restaurants.
4. Mortgage Rates
In 2020, record-low mortgage rates spurred homeownership. Sources estimate that in 2020, mortgage rates will hit a 50-year low.
The rates are on the decline now after reaching 4.94% in 2018. But, in January 2021, the mortgage rates hit an even lower rate of 2.65%.
Also, due to the pandemic’s impact, Fed decided to keep mortgage interest rates close to zero at the end of January 2021. We experienced another spike in January 2021, where mortgage refinancing activity was 93% higher than in 2020.
We expect mortgage rates to rise this year. Though that is inevitable, smart real estate investors are still grabbing good opportunities.
Rising interest rates may discourage people from buying. The rental market thus has a nice opportunity from an investment point of view.
Financing is another factor you need to know before investing in real estate. You can opt for 100% hard money financing for your real estate investment.
Hard money financing is an awesome option, especially if you are looking for fix and flip investments.
5. The Emergence Of Alternative Property Sectors
Since expansions are due in the hot market, investors keep a close eye on these opportunities. Real estate investors are watching for single-family build-to-rent residential opportunities.
Still, homebuyers are staying away from the cities after Covid-19 caused the migration to suburbs. The shift makes build-to-rent properties more popular.
Research shows that single-family homes for rent in 2020 increased by 30%. Also, last-mile industrial real estate is becoming a big interest.
During the stay-at-home orders, we have seen online shopping growing in popularity. So, warehouses are becoming a lucrative investment.
6. Growing Online Real Estate Services
We now see online real estate services that allow you to browse or list a property for sale. Did you know there are online services that will now offer to buy or sell your property for you?
Here is how the online real estate services work. You contact companies and tell them about the house you want to sell.
Then, the company you choose to work with will buy the property from you, do some renovations and sell it at a higher price. The company will also handle home inspections, repairs, and home showings.
You will have less hassle, and the company charges you almost the same cost as an agent commission for the selling costs. But, some companies will also include a service fee, meaning you may have a smaller profit.
Also, you won’t be working with a real agent who knows the current real estate investment trends in your area.
7. More Accessible Risky Buying Options
Some sellers will offer a rent-to-own agreement to anyone itching to own a home but can’t afford it. In this “bad” deal, you are offering to rent a home for a while before becoming the owner.
The best side is getting into a house fast in a rent-to-own agreement. You also do not have to qualify for a mortgage immediately.
But the downside to it is that your rent becomes more expensive since a bit of your monthly payment goes towards your future homeownership.
Another risk is that you can’t have those extra payments back if you break your contract. Also, you will handle all maintenances and repairs while renting.
If you know you might not afford homeownership yet, don’t decide to buy one. Save for that down payment until your finances are in a row.
8. Continuous Rise In The Sun Belt’s Popularity
Americans shifting from big cities often move to the Sun Belt. The popularity of the Sun Belt is growing due to the pandemic. You should expect it to continue in the future.
The region in the past had a bigger appeal to the retired set. But now, the region is attracting the younger profession due to its lower taxes and affordable housing options.
Also, the biggest cities in the region offer more space than the top metro areas like New York. Real estate investment is growing in the Sun Belt region due to the growing relocation and rising population.
The growth we are seeing isn’t limited to single-family properties. But, it translates to commercial real estate and multifamily housing.
Dallas and Tampa are the two major Sun Belt metro areas and rank in the top ten US cities with the biggest real estate potential.
9. Fluctuating New Housing Starts
In 2020 housing starts were unpredictable. Starts were higher and better than we expected. We can say they beat our expectations, but they later shrunk again.
The last report was also different across different states in the US. Compared to last year, single-family rose by 4.1%, while multifamily homes were down by 25% in August.
But, that can also be misleading. For instance, home starts were down by 17% in the South and 33% in the Northeast.
There were also almost reverse gains in the Mideast and West.
New housing may be getting tighter in different states, and in other areas, it’s looser. But, multifamily is still tight.
More buyers are looking for homes, not in the single-family or multifamily new home market. That means buyers are more interested in flipping houses.
Buyers are looking for rehabs. The kind of homes real estate investors may potentially provide. You can find such kinds of houses in foreclosures.
10. More Foreclosures
Since the economy is currently recovering, we will see more buyers in the market. But, the recovery will not be universal nor even.
More people will suffer from mortgage grace periods ending with no full employment. An estimation through 2021 shows that up to 500,000 evictions happened across the US.
We are now seeing evictions at the rate when Covid-19 first hit. That’s due to the eviction moratorium, even though it has many loopholes.
Once the moratorium is over, many people may be unable to pay. And that’s where real estate investors come in.
Most people will look to sell before the foreclosure since there are many legal and financial burdens.
When you find an owner of a distressed house, offer them a deal before the foreclosure works out for both parties.
You will be looking towards flipping houses as the owners get out of the tough situations with their cash on hand.
11. Office Spaces May Not See A Comeback
In 2021, we all had the idea that 2022 would be the year we all returned to the office to work in person. But, we are now seeing that might not likely be the case this year.
For instance, Apple already announced that they do not plan to bring back workers to the office. More companies will also follow suit.
Due to the omicron variant surge, there is a lot of uncertainty, making it unlikely for us to return to the office spaces. But, when buying real estate, you should not count out commercial office spaces.
Industrial real estate is still experiencing more growth along with commercial real estate. That’s due to the increase in on-demand shipping and services and supply chain issues.
Retailers are now moving from a just-in-time to a just-in-case model. Also, various analysts are looking beyond the term adaptive reuse.
In such a model, we have redeveloped and seen the conversion of unused real estate that better serves the community and its needs. For instance, affordable housing and industrial real estate are in high demand.
Consider Learning Real Estate Investment Trends
You now know the common real estate investment trends happening in 2022. But nothing is certain right now.
There may be an uneven upswing in 2022. Rental properties in big cities are still on the decline. There’s an opportunity for real estate investors anticipating the city life recovery post-pandemic.
Some signs of such a reverse include a rise in housing supply and mortgage rates as construction matches demand.
We’ll see the temporary real estate investment trends due to the pandemic and those that persist over time.