The real estate market probably isn’t going to see the massive price growth of 2021, but that doesn’t mean there aren’t opportunities and also markets that can be considered hidden gems. This is especially true for investors. In fact 2022 may bring more opportunities for savvy investments than last year.
The National Association of Realtors surveyed more than 20 economic and housing experts. The goal of the survey was to look at their expectations of home-price growth, changes in interest rates, and inflation. That group predicted median home prices will rise by 5.7% on average in 2022, compared to the 4% rate of overall inflation.
Experts also predicted the Federal Reserve might raise interest rates twice by 0.25%. The Fed has signaled it expects three rate hikes. What direction the Fed takes will play a role in home price growth and related real estate trends next year.
Regardless of the specific economic considerations, the following are some of the investing trends to look for in real estate in the upcoming year.
Undervalued Housing Markets
If you’re an investor, it’s a great time to look at undervalued housing markets rather than markets that are already highly saturated with huge demand.
The National Association of Realtors named some housing markets they believe are currently undervalued and should go up.
These include Dallas-Fort Worth, Texas, Huntsville, Alabama, Knoxville, Tennessee, and Spartanburg, South Carolina. Other names on the list are the Palm Bay-Melbourne-Titusville, Florida area and San Antonio-New Braunfels, Texas.
Preparing for Rising Mortgage Rates
In addition to the general understanding that mortgage rates will rise this year nearly inevitably, smart real estate investors are looking for opportunities in spite of this.
This could mean, for example, that if you’re an investor or you’re looking for opportunities, you think about the fact that rising interest rates could price some people out of buying. Therefore the rental market could create good opportunities from an investment standpoint.
Mortgage lenders tend to dread rate hikes because they cause a decline in business. Mortgage lending inevitably slows as rates go higher. Some industry organizations are expecting loan originations could drop 33% from 2021.
Single-Family Rentals Remain a Strong Investment Opportunity
As you might think from seeing the above analysis, single-family rentals are still a strong investment opportunity. Big names are competing to scoop up many of these single-family rental properties, and they did so throughout last year.
It’s drawn anger from many, but at the same time, you could, in your own smaller way, follow what they seem to think is the future when it comes to investing.
Office Spaces Aren’t Likely to See a Comeback This Year
In 2020 and throughout much of 2022, there was the idea that 2022 would be the year everyone returned to the office and working in person. We’re already seeing that’s very unlikely to be the case. For example, Apple recently announced they have no plans to bring office workers back. Most companies are likely to follow suit. The omicron variant surge is leaving a lot of uncertainty that will continue to put a damper on office spaces.
That doesn’t mean all commercial spaces should be counted out on the investment side of things. Industrial real estate dedicated to logistics is experiencing a lot of growth within the commercial real estate market right now.
This is due to an increase in on-demand services and shipping, as well as supply chain issues, so retailers are moving toward a just-in-case instead of a just-in-time model.
Some analysts are looking ahead to the term adaptive reuse. In this model, there’s conversion and redeveloping of otherwise unwanted or unused real estate to better serve the community and needs. For example, office buildings and retail were severely affected by the pandemic, and industrial real estate and affordable housing are in high demand.
The Metaverse May Become More of a Reality
It seems far-fetched to say the metaverse might become part of your real estate investment portfolio, but it seems that’s exactly what’s happening. Within the metaverse, investors are buying and renting virtual real estate. There’s also the new MetaSpace Real Investment Trust (MREIT), which is now available on a crypto trading platform.
Landlords Being Forced to Sell
Finally, unfortunately, throughout the pandemic, landlords have faced significant challenges. Eviction moratoriums leave them with renters who haven’t paid in months or maybe years. They’re still carrying the financial burdens of the property. They may in the not-to-distant future be forced to sell, and patient investors could be waiting on the opportunities that present themselves from that.
