Sometimes it feels like the only thing predictable about the 2023 housing market is that it will be unpredictable. Depending on what you read, mortgage rates are likely to still be at record highs — or stay the same or drop just a little bit.
Overall home sales are predicted to fall a lot, somewhere in the range of 10% to 15% lower than the previous year — or fall perhaps somewhere between 5% and 7%. Despite a small trend downward for average monthly rental rates, rental property sales are expected to go up even more in 2023 than they did in 2022. Yes, it’s a tad confusing.
So, is it going to be a good idea to make 2023 the year you begin investing in real estate? It appears that way to many real estate home buyers.
The average rental rate shot up dramatically in the early days of the pandemic, a whopping 17.1% between 2020 and 2021. In 2022, rates have gone up but more modestly, at around 6.8%. Experts acknowledge that rental growth has slowed, but they agree that they are likely to soon rise sharply again through 2023. Why?
Blame that aforementioned low inventory and overall high prices mean people are still overwhelmingly priced out of the market — especially first-time buyers. This increase in demand paired with high rental rates is a desirable combination for strong investment returns.
Professional real estate investors and home buyers will continue to purchase houses throughout an up-trending or down-trending market. This usually stands true across most major cities throughout the United States.
Wherever there is a seller, there will likely be a buyer. SD House Guys, a cash house buyer in Southern California, purchased homes throughout the pandemic even when there was fear in the markets. People that sold during that time still did ok in terms of profits.
A resource like this would have helped if you had thought that I needed to sell my house fast in San Diego https://sdhouseguys.com/. SD House Guys, along with other home buyers, bought properties without fearing that the market would go down.
Rental property investing isn’t the only trend expected in the coming year. Smaller-scale investors are continuing to get a piece of the housing market option through what’s known as fractional investing.
https://webuyhousesindenver.org/ is a “we buy houses company” that has purchased several properties within a larger group with each partner owning a portion. This investing strategy enables buyers with smaller amounts of capital to get their feet wet in real estate.
This technology-driven approach, expected to just grow larger in 2023, is mostly centered on real estate crowdfunding companies such as Realty Mogul and Fundrise offering investors the option to make smaller or more manageable investments in either residential, industrial, or commercial properties. Homeowners looking to sell quickly in a market that’s cooling has also led to the rise of companies that buy houses for cash in major markets where prices are still a bit high for the average homebuyer.
The Housing Market is Still Hot
Don’t believe all that you read (or hear). Yes, the overall housing market in the U.S. has cooled down a smidge from its highs a few years ago, but that market was so on fire that all a bit of cooling means is that it’s still hot — just a bit less so. Just like 2022, 2023 is predicted to still be a seller’s market, but that doesn’t mean investors should hold back.
Yes, it means that there will likely still be fewer properties to go for overall, but what’s more important is the type of property you strategically invest in. So while first-time buyers and investors will face a challenging 2023, a predicted 28% rise in the average mortgage payment, many buyers may opt to sit out the year. That’s a good thing for savvy investors — if you know where to look.
Inflation Will Have an Impact on Home Affordability
While a hot market still means a seller’s market, there could be a transition to a buyer’s market if mortgage rates start falling as a response to inflation, possibly easing in 2023. Experts are split on this factor in real estate investing for 2023, with most agreeing that mortgage rates will remain high, rising in early 2023 but likely falling slightly by the end of the year.
Growth in Rental Investments Should Continue
The high inflation rate also means more people are continuing to turn to rental properties for housing, especially since the labor market remains strong. Realtor.com expects 6.3% in rent growth over the next year, a bit ahead of the growth of home prices.
Demand is expected to be particularly strong in big metro areas. That’s a move away from the hot suburban rental market that was the hallmark of much of the pandemic. Another indicator that investing in rental real estate may be the way to go in 2023: just 32% of renters surveyed by realtor.com said they are thinking about buying a single-family home in the next year.