Real estate is a popular investment strategy for many because of its ability to hedge inflation, earn passive income, and build equity. However, despite rental properties retaining their value over a long time, there can still be intermittent periods where the market could be more friendly. So if you’re a newbie or an experienced investor looking to expand your portfolio, look out for telltale signs indicating whether the market will be friendly in the coming year.
Thus, before asking questions like how to get a loan with bad credit and tips for property searches, stick around to find out if 2023 is a good time to buy a real estate investment.
Is 2023 a Good Time to Buy a Real Estate Investment?
It’s no secret that 2022 wasn’t the best year for real estate investors. Home prices peaked at breakneck speeds, making it harder for potential homebuyers, and the market cooled. Coupled with the high prices, the Federal Reserve also hiked its interest rates to fight inflation, making borrowing more expensive. These two factors brought the rental market industry to a crawl, leaving investors with many questions about what 2023 might have in store.
Mortgage rates might remain high
Despite mortgage rates hitting an all-time high in November 2022, it’s unlikely those figures will decrease significantly in the new year. Today, the average interest rate for a 30-year home loan stands around 6.3%, more than double the figures we saw in previous years like 2021.
Experts have cautiously tried to predict what direction the mortgage rate will take in the future. Still, it’s unlikely the Federal Reserve will implement any monetary policy that dips the rate by more than 0.5%. Although, borrowing costs are likely to remain high as inflation continues to ravage the economy. With such a precarious position, investors willing to take out loans at such high prices need the right strategies to pull a profit. Bay Property Management Group, Washington DC, can help evaluate your rental investment and keep your portfolio green in the new year.
Housing prices will drop
Another prediction expert financiers have for 2023 is that housing prices will likely drop in the coming year. Considering mortgage rates are at one of the highest peaks they’ve been in over two decades, homebuyers are scarce. However, that’s good news for buyers who can still secure financing because it could mean a buyer’s market is on the horizon. After all, sellers looking to offload their properties realize the housing market is cooling drastically. With impending inflation and unemployment on the rise, it’s evident that demand for housing will shrink. Although it’s unlikely that prices will go into freefall, you should leverage the good deals.
There could be high competition
Despite rising mortgage rates, many investors will look to banks and private lenders to secure loans to capitalize on lower house rates. In addition, considering that many millennials are now at the age of buying their first home, those who can afford it will be hunting. Thus, even amid a seller’s market, you could be outbid by others with more money, especially for high-value houses. Although other experts foresee less competition in 2023 as the construction boom of this year means an increase in inventory.
Suburban migration will continue
When people ask what rental investors can expect in 2023, they often expect projections on mortgage rates and housing prices. However, experts also share some insight on migration trends which could be helpful. In 2023, suburban migration will likely continue to climb as it’s done since the pandemic. With more people switching to remote or hybrid work, there’s no rush for apartments in megacities, and people are happy to settle in the suburbs. Also, this year suburban areas have witnessed a boom in their construction, stocking the market as demand slowly climbs.
Conclusion
2023 is likely an excellent time to buy a real estate investment because of the lower prices. A full inventory and higher borrowing costs mean investors can easily secure houses at the best deals. However, other investors that can secure financing will also be on the prowl, and the competition for high-value homes in good neighborhoods could be stiff. Landlords also have to consider that with inflation in sight, they might have to reevaluate their rental prices to reduce vacancies, despite borrowing at higher rates.
All these metrics can be hard to tackle, but you don’t have to do it alone. If you need an extra hand planning your investment strategy for 2023, consider consulting an expert. For example, a professional property management company could be a great aid in selecting the best opportunities to keep your rental business running.