It can be tough to evaluate the real estate market when it appears that contradictory factors are at play and there’s uncertainty about the future.
But one thing holds true for every investor in any market—when the market shifts, so should your plan.
Now is a good time to think about your long-term investment goals, become more in touch with your local market than ever, and capitalize on shifting price points.
Looking at the Data, Let’s Put the Current Market Into Perspective:
This week, the Federal Reserve raised interest rates by three-quarters of a percentage point. This is the fourth rate hike this year. Just last month, the Fed also raised the federal funds rate by three-quarters of a point, the largest single rate hike since 1994.
What’s the Federal Reserve’s Goal?
To ensure price stability, continue to lower inflation and make sure the labor market is strong.
During this week’s press conference on July 27th, Federal Reserve Chairman Jerome Powell said, “it doesn’t make sense that the economy would be in recession.”
This sounds positive. And while we’re dealing with the most rapid inflation in decades, currently hovering around 9%, the labor market is strong.
And this is where contradictions come into play.
- Housing prices are still rising, but roughly one in seven homes in June had a reduction to their listing price, according to NAR.
- The days on market for a listing are down to 14 versus 17 days in June 2021.
- Mortgage rates have risen but appear to be steadily hovering just under 6%.
- Sellers are still receiving multiple offers, but not as many and not in every market.
- Housing inventory has risen 18.7% from June of 2021 but there is still a significant shortage of available houses nationwide, relative to demand. Active listings may be up but they are down 34.1% from 2020 and down 53% from 2019.
“While more homes are coming on market, the lack of inventory is still very much a crisis and the supply issue will not be fixed for some time”, Ian Fredrickson, Regional Director at New Western explains, “days on market have fallen since last year and because most inventory is lived-in quality, flipped houses in top-of-market condition are well-positioned for success.”
So What Should an Investor Focus On in This Market?
Rental properties.
Single-family rentals are among the best investments people can make right now. At a time when other investment vehicles such as stocks or crypto are in decline and extremely volatile, it makes sense for investors to buy tangible assets that give them greater control.
Currently, investors are able to buy better rental properties with greater equity than in years past and this trend should continue in the months to come.
Rental homes make a great place to not only park money as a hedge against inflation, but with rents trending the way they are, they are an opportunity to really cash flow.
Right now…
Realtors are conducting open houses for rentals with renters competing in multiple offer situations to rent homes. Meanwhile, rental vacancies continue to remain low, below six percent.
Rising mortgage rates are pricing many would-be homebuyers out of the home-buying market, forcing them to continue renting.
Rental listings are going to the highest and best offer or require a year’s rent to be paid up front. And the median asking rent hit over $2000 for the first time in history.
“We are seeing a lot of interest in the buy and hold side as well”, according to New Western’s Ian Fredrickson, “investors view rentals as a safe investment because they are getting better deals on distressed houses than we have seen in years. Investors’ equity expectations have increased, so the deals are cheaper, the cash flow is better, and that puts buyers in a great spot to capitalize on the upside as the market improves and they ultimately sell.”
What Steps Should You Take To Find Your Next Investment Property?
- Watch the market you’re looking to buy in. Pay attention to the conditions of that local market, specifically. Things like days on the market, home prices, and homes sold below asking.
- Work with a New Western agent to find an investment property. It’s important to work with an agent that is an expert in investment home buying. We have experienced agents across the country who specialize in their local market.
The Hedge Against Inflation
Your money needs to work for you. When cash sits on the sideline, especially during record-high inflation, it’s not working for you.
With the prices of investment homes decreasing and potential equity thereby increasing, it can be a good time to put cash into an investment property. A smart rental purchase will create an opportunity for immediate cash flow and allow you to capture greater equity in the years to come as home prices increase.
So What Is the Bottom Line?
Don’t sit on the sidelines. Adjust your plan. Stay in the game.
Creating Opportunity. New Western.
The current conditions make the aged housing inventory New Western delivers an exceptional opportunity for investors to help revitalize our communities and expand homeownership opportunities. With the administration’s tax credit continuing to advance through Congress, it’s an even more appealing proposition for real estate investors.
As the largest private source of distressed properties in the nation, New Western is uniquely poised to help investors identify qualified properties to meet their goals and help positively impact neighborhoods across the country. Contact us today and see how we can help you find the right deal for your investment strategy.
