Blog | Real Estate

5 Real Estate Market Predictions for 2023…

And a few tips to navigate your New Year's resolutions

And a few tips to navigate your New Year's resolutions.

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, we’ve been keeping a close eye on various reports and predictions for 2023 - and we’ve got some good stuff to share.

5 real estate market predictions

Here’s a brief recap of what we’re seeing. The information below will help you make more informed decisions when it comes to evaluating new investment opportunities this year:

1. Normalized mortgage rates

   Here are some interesting statistics, according to a Forbes article:

   • The average mortgage rate for a 30 year fixed is 6.48%, versus 3.22% at the start of 2022.

   • The average cost of a 15-year fixed-rate mortgage is at 5.67%, versus 2.43% in early January 2022.

   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 changed in 2022. As the pendulum swung, most housing experts predicted these rates to level off in 2023 at around 5% to 6%, though some say they expect the increases to continue into the spring of this year.

   

2. Continued 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. And the shortage is still present.

   According to another Forbes article, the number of homes for sale hit an all-time low during the week of November 28, 2021. And this article by the National Association of Realtors confirms that home shoppers will likely still be struggling with housing affordability in the new year.

   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 reasons are the residual effects of the 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

   Just a few years ago, we reported that with housing prices rising in major cities, many people were having to bite the bullet and move out to the ‘burbs. We 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 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. This 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. Amenities will attract investors

   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.

Tips and resources to help you dive in

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.

Below are a few tips to and resources to help you take the first steps towards your real estate adventure.

1. Look for new buying patterns: In real estate, it’s always important to know your demographic, and times, they are a-changin’. Consider the following:

   • The baby boomers who once purchased all the traditional colonial-style homes are now ready to downsize. But they don’t just want less space, they are also looking for ranch-style homes so they don’t have to navigate stairs as they age. What does that mean? Single-story homes will increase in value as demand rises.

   • Millennials—who could make up 43% of homebuyers taking out a mortgage by the end of 2023—are finally ready to purchase their first homes. Because they are largely seeking affordability and quality of life, they are having to trade in the urban life they crave and head out to the suburbs.

   • During the Great Recession, more than 10 million Americans were forced into foreclosure—and their seven years of waiting to purchase another property (due to foreclosure law) is over. In total, it’s expected that 28 million Americans plan to purchase a home in 2023.

2. 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.

3. 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!).



4. In 6 Ways to Find Investing Money for Beginners, eliminate 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.

5. In The (Many) Pros and (Few) Cons of Real Estate Investing, you’ll get an unfiltered look as to why real estate may - or may not - be for you.

6. 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, you’ll b encouraged to truly start small and build your confidence through first-hand experience and education.

The more you read and learn, 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. Are you ready?