The real estate market has seen a lot of instability over the last few years. Investors and other industry experts went into the new year wondering what to expect; another year of tumultuous market activity or will things begin to settle?
Keeping up with market trends in real estate is crucial for investors. 2023 will surely bring a great deal of change to the real estate market, as we’ve already witnessed as the first month of the year comes to a close. Here are some likely trends to consider as you contemplate projects and strategies for the year ahead.
A Return to Urban Markets
A massive trend following the pandemic was the move to suburban areas. Many people transitioned to working from home and no longer needed to live in the city. The sharp rise in rent and home prices also drove buyers out of the city and into more affordable, suburban areas.
For 2023, it’s looking as though cities will recover and demand will increase as remote employees become hybrid or move fully back into the office. Due to interest rates and inflation, many people moving back into the city won’t be able to afford to buy a home, making this a great market for investing in rental properties.
Dramatic Rise In Property Prices Are Falling
Over the last two years we’ve experienced a substantial appreciation in real estate. Things escalated so quickly that it caused a major affordability issue for home buyers. This created a demand for rentals, which in turn caused rents to rise concurrently with home prices. As 2022 came to a close, and interest rates rose, we’ve already begun to see this sharp appreciation flatten. The appreciation experienced over the last two years was unsustainable and although it’s hard to say how much home prices will fall, this trend will ease pressure imposed on buyers.
Rental Rates Remain Strong
All signs point to a steady demand in rental properties for 2023. As previously mentioned, the move back into urban areas and the high interest rates will keep the rental market strong. Although 2023 brings a lot of uncertainty, industry experts generally agree that we may even see more increases in rental rates over the next year. Affordability is still an issue, especially for first time home buyers and is creating a population of “forever renters.” This is a great time for investors to seek out multifamily properties and maximize returns as we could potentially see rental rates reach historic highs.
More Alternative Financing
Mortgage rates reached historic lows in 2021, dropping to 2.65%, making it a great time to take out a mortgage or refinance on your loan. Mid 2022 interest rates spiked and remained high throughout 2022. Today the current rate for a 30 year fixed rate mortgage is 6.43%. This trend in rising interest rates has pushed home buyers out of the market, leaving more room for investors with access to alternative financing options. Investors should consider alternative financing options, such as private money lenders because they can offer more flexible terms than traditional banks. Check out our tips for selecting a private money lender before you get started!
Despite the uncertainty surrounding the real estate market this year, investors can surely find rewarding opportunities by keeping up with trends and finding unconventional methods of financing.