Real estate is experiencing a boom right now, and prices have been rising over the past 12 months. In fact, within a short period of time, the median price of existing single-family houses rose by double digits in 78% of the 183 markets the National Association of Realtors examined.
Chances for real estate investing are growing along with the popularity of home ownership, and many of these opportunities depend on a few important characteristics. We explain them in more detail below, along with how they might affect the investment environment in 2022.
1. Interest Rates will Remain at Record-Low Levels
Since the start of the pandemic, the Federal Reserve has maintained short-term interest rates at or near zero, but it has been considering raising rates in 2019. Even if increased interest rates are anticipated, they are still anticipated to remain historically low.
Chief Investment Officer for the Americas at DWS Group David Bianco anticipates two quarter-point rate increases in 2019.
Additionally, markets do not anticipate significantly higher interest rates. While 30-year fixed mortgage rates are slightly above 3%, the yield on the 30-year Treasury bond is still less than 2%.
Although the surge in home purchases is anticipated to slow down a little in the coming year, the persistence of the cheap interest rate environment may indicate that the boom won’t finish anytime soon.
2. The Development of Alternative Real Estate Sectors
New chances are opening up for savvy investors as the real estate market grows. The following real estate industries could do better in 2022:
Single-family homes built for rental purposes:
Build-to-rent homes are becoming more and more common as people move out of cities. According to research, the number of single-family homes constructed for rent rose by 30% between 2019 and 2020.
Industrial real estate for “last-mile” delivery:
Over the past two years, the growth of internet shopping has made room for more “last-mile” buildings like warehouses. These kinds of properties might become highly profitable in the future if e-commerce keeps growing at its current rate.
Multi-asset real estate in the South East:
According to demographic information from the 2020 Census, investments in multi-family communities have been slowly growing in popularity, particularly since new areas of the country are offering more chances.
These investments may offer the chance for strong returns for people seeking broad diversity.
3. Positioned for Further Appreciation: The Sunbelt
Real estate is in high demand in the Sunbelt, which encompasses cities in the southern part of the United States, and this situation is not going to alter any time soon. What’s causing rising Sunbelt real estate prices is as follows:
Population expansion
Ten of the fifteen cities in the United States with the greatest growth rates are located in the Sunbelt, according to Census data.
Major southern cities are experiencing substantially faster population increase than the Northeast and Midwest.
Local governments that are welcoming to business
The quantity of well-paying occupations present in the neighborhood is closely connected with real estate values. Therefore, higher real estate values are probably to be found in states that are desirable to employers. Business-friendly Sunbelt states including Tennessee, North Carolina, Texas, and Georgia have drawn thousands of people.
Milder climates
The income from real estate is influenced by both rent rates and maintenance costs. If everything else is equal, maintenance costs in colder climes are higher than in warmer ones.
How to Take Advantage of Investment Opportunities in Real Estate
These statistics show that as we approach 2022, there are a number of chances in the real estate market for investors. However, there aren’t many websites that allow regular investors to browse a diverse selection of desirable properties.
One of those platforms is Fundrise, the biggest direct-to-investor real estate investing platform in America. Fundrise selects properties with a high potential of generating significant risk-adjusted returns thanks to a team of skilled underwriters that rigorously and comprehensively vet investments.
Furthermore, Fundrise’s track record of strong and consistent returns—even during periods when public REITs saw drawdowns—illustrates the team’s exceptional capacity to recognize outstanding investments and assist clients in achieving the performance they desire.
Every investor can open an account with Fundrise; whether you want to start with $10 or want to invest $100,000, they have an account for you.
The markets are very unclear as we approach 2022, with the possibility of significant corrections in the equity and cryptocurrency markets at any time. You may tap a resource that has traditionally had a stabilizing effect on portfolio performance and set yourself up for long-term growth through high-quality private market real estate investments.
Reference
- CNN, 78% of US markets hit with double-digit home price increases, Accessed September 24, 2022.
- CNBC, Fed is expected to speed up end of bond buying and signal interest rate hikes are coming, Accessed September 23, 2022.
- CNBC, Treasury yields are steady after hot inflation number following big increase this week, Accessed September 23, 2022.
- Fox Business. Slow creep stalls: Mortgage interest rates level off at bargain lows | Dec. 10, 2021, Accessed September 24, 2022.
- The New York Times, The Market for Single-Family Rentals Grows as Homeownership Wanes, Accessed September 24, 2022.
- The New York Times, The growth along the corridor between San Antonio and Austin is kind of mind-blowing, Accessed September 24, 2022.
- United States Census Bureau, The South Is Home to 10 of the 15 Fastest-Growing Large Cities, Accessed September 24, 2022.