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5 Real Estate Market Predictions for 2022

Investing in rental properties this year? Here’s what you need to know.

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Investing in rental properties this year? Here’s what you need to know.

Is one of your New Year’s resolutions to finally dip your toe into the real estate investing pool? Or do you already have some investments and are wondering what’s in store for the industry this year? As you can imagine, given my own substantial real estate investment portfolio, I’ve been keeping a close eye on various reports and predictions for 2022.

5 real estate market predictions

Here’s a brief recap of some of the information I’m seeing, as it will help all of us make more informed decisions when it comes to evaluating new investment opportunities this year:

  1. Increasing mortgage rates

    Over the last few years, rates for a 30-year mortgage in the U.S. tumbled to some of the lowest on record in our nation’s history. And in 2021, we hit the all-time record-low of 2.65%. It seemed as though everyone was buying homes and refinancing to take advantage of these amazing deals.

    But that will be changing by the end of this year. That’s right: When the mortgage rates are this low, the only place for them to go is up.

    Expect rates to rise throughout the year, inching toward 3.7% to 4% by year’s end.

    In the meantime, there’s no time like the present refinance any current investment properties (or your primary residence) and get a less expensive loan while you still can.

  2. Real estate inventory shortage

    Look around — are you seeing new residential housing developments going up? Probably not very many. Inventory of homes has been low for years, as increased costs of supplies and labor means a lack of new housing projects. But now it’s lower than ever.

    According to a recent Forbes article, the number of homes for sale hit an all-time low during the week of November 28, 2021. And this article in the Wall Street Journal discusses how we’re 5.5 million units short of what’s actually needed.

    So what’s at the root of this real estate inventory shortage? It’s partly due to the housing crash over a decade ago — many homebuilding companies went under. And what little building is going on, is geared toward the higher-end housing because the margins are more attractive, leaving millennials and other first-time homebuyers priced out of the market. Simply put, there aren’t enough new housing options to keep up with the demand, and this is leading to rising housing costs.

    Of course, the other reason is the ongoing pandemic and economic uncertainty — a lot of homeowners are playing a “wait-and-see” game and hesitant to make a move. Plus anyone who lost their job may have a tough time qualifying for a mortgage, which will also keep them from moving.

    With such a low home inventory, you may have to lower your expectations of what you’re looking for or be prepared to shell out more money than you were planning to in order to purchase real estate. Even then, expect bidding wars thanks to the increased competition. Finally, make sure you have all your ducks in a row for financing ahead of time — you’ll likely have to make an offer the same day you see a property to have a shot at purchasing it.

  3. Suburbs continue to gain popularity

    Last year, I reported that with housing prices rising in major cities, many people were having to bite the bullet and move out to the ‘burbs. I also mentioned that tech companies were starting to move to secondary markets where millennials could afford to live.

    But now that so many employers have switched to a remote work model in light of the pandemic — and many plan to continue this practice long after it ends — it may no longer matter where you live at all. Thus, we’re seeing a mass exodus out of ultra-expensive cities like San Francisco and Seattle in favor of more affordable cities like Phoenix and Austin.

  4. Fantastic rental market for investors

    So what happens to all those people who can’t afford to buy a new house because of rising costs and lack of inventory? They rent, of course! This positive rental market is great news for landlords, as there won’t be as much concern over vacancy.

    According to Ken McElroy, Rich Dad real estate advisor and our investing partner, we’ve had a declining homeownership rate in the United States since 2005 (when it peaked). And with 50 million people added to the country in the last 20 years due to immigration and increasing birth rates, there’s an increased demand for housing. His latest video explains it all in just five minutes.

    Rental prices continue to rise across the country, which means you can earn more cash flow from your tenants. For instance, in December 2021, one bedrooms were renting at 21.3% higher pricing compared to the same timeframe in 2020 and there was a 16.7% rent growth on two bedrooms. Wow!

  5. Use amenities to attract renters

    One way to attract new tenants to your rental property is by choosing your amenities wisely. Renters are looking for upgrades like keyless locks, smart thermostats and doorbell cameras, open floor plans, stainless steel appliances, in-unit laundry, media rooms, secure parking and online rent pay. You’ll want to explore these options, checking out competitors in your market, and then decide what will attract the right renters to your investment property.

Resources to help you dive into the rental market

Since I don’t have a crystal ball, these are merely housing market predictions based on everything I’ve read and all my experiences over the decades. Honestly, it’s impossible to say what will really happen with any certainty. That’s why it’s important to follow the market closely and become familiar with neighborhoods, city trends, and the available inventory in your town. You’ll also want to study up on real estate investing as a whole, to make sure it’s the right decision for you.

I’d suggest starting the process by reading a few of my past real estate investment blogs. I’ve selected some of the most popular ones, which cover a wide array of topics:

  1. Don’t know where to begin looking for the perfect investment opportunities? Check out How to Find the Best Real Estate Investment Deals to see where they’re all “hiding” — yes, even with this current housing shortage, they’re out there.

  2. Getting Started in Real Estate helps you say goodbye to the dreaded analysis paralysis and say hello to the financial freedom you crave. In this blog, you’ll learn about some unexpected real estate investment opportunities (spoiler alert: mobile homes are an inexpensive option you probably haven’t considered!).

  3. In 6 Ways to Find Investing Money for Beginners, I help dispel the myth that you need to use your own money as a down payment for your first investment property (or any type of investment, really). Once you realize that money isn’t holding you back from your investment dreams, the sky’s the limit. So, if a lack of money is your excuse, don’t miss the tips.

  4. I think real estate investing is the bee’s knees, but that doesn’t mean it’s for everybody. In The (Many) Pros and (Few) Cons of Real Estate Investing, I delve into the reasons why I love it so much. But I also don’t like to sugar-coat things, so I’ve also included some of the disadvantages that may not be as appealing, depending on your situation.

  5. Too many first-time investors think the saying, “go big or go home” applies when it comes to starting out in real estate. It does not. In 3 Simple Steps to Creating a Winning Investment Plan, I encourage you to truly start small and build your confidence through first-hand experience and education.

The more you read and learn (hey, I still do it every day!), the more confident you’ll be about not only recognizing, but jumping on a great real estate investment opportunity the moment one comes your way. And if my real estate predictions for 2022 are any indication of how things will play out, you’ll need to jump fast.

Original publish date: January 31, 2019

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