<img height="1" width="1" src="https://www.facebook.com/tr?id=113643043990058&amp;ev=PageView &amp;noscript=1">
3 min read

2023 Real Estate Market Predictions That Impact Investors

Nov 15, 2022 10:00:00 AM

What does the upcoming year have in store for real estate investors?

While predicting the future is never a sure thing, there are indicators that we can look to ascertain the trajectory of the market. It might not be set in stone but knowing what may be ahead equips real estate investors to mitigate their risk and employ successful strategies in the new year.

5 Pivotal Predictions for the 2023 Market

1. Interest rate trajectories will hinge on wrangling inflation

There are two schools of thought regarding what 2023 will hold for real estate investors, but it ultimately comes down to how successful or not the feds will be at getting inflation under control. Potential buyers may be hinging their hopes on lowering interest rates that have grown prohibitive considering housing costs.

If inflation continues to wreak havoc on the U.S. economy, we’re not likely to see those rates go down over the next year. Between inflation, geopolitical tensions, and the recession on the horizon, we just don’t know which way the pendulum will swing.

The Takeaway for Investors:

Should interest rates remain high, investors will need to be that much more diligent in protecting their relationship with lenders. Keep your credit score in check and your debt-to-income ratio balanced so that you can secure the best rates possible.

2. Home prices will basically remain the same

Although one of the hopes was that increasing interest rates would temper home prices, that may not be the case. Inflation means that home values are rising to keep pace. Inventory is still tight, too, and that will keep supply from overtaking demand.

The Takeaway for Investors:

Due diligence in your future property acquisitions will be more important than ever. Investors need to be sure they’re targeting properties that fit with their portfolio. It’s not the time to be opportunistic: rather, investors should focus on clear priorities and high standards when buying new property.

3. Unaffordability will push more households toward renting

Couple arguing in front of boxesInterest rates and property prices will push more homebuyers to the sidelines. As they wait for more favorable buying conditions, more households will choose to rent for the foreseeable future. The renting boom is far from over and investors will not only have a larger pool of renting households, but more competition from other investors.

The Takeaway for Investors:

The build-to-rent model will help ease investors competition for existing inventory. No matter how big or small your portfolio is, your top priority will be maintaining the value your property offers: quality of renovations, access to amenities, and excellent management.

4. Tight inventory will likely keep the market balanced

We’re still stuck with just three months’ worth of housing inventory. Despite interest rates and high property prices pushing demand down, the distinct lack of inventory is what’s going to keep the market from going full-tilt into a crash or a definitive seller’s market. Inventory isn’t likely to pick up, particularly as existing inventory is expected to shrink as sellers hope for more favorable conditions. Ultimately, we’re going to see a market more in balance than the one of the past few years.

The Takeaway for Investors:

Although inventory will remain tight, investors will see less competition for properties. Tempered demand means that properties will last longer on the market. We’ll see much fewer offers above asking price, too.

5. The combined costs of buying properties will spur another remodeling trend

GIF of man tearing down wallWe saw a home renovation boom in 2020 when staying at home during quarantine created extra spending money and too much time to see all the flaws in one’s property. We’re likely to see another boom in the remodeling sector, but not because of quarantine. High property prices will have homeowners and renters alike looking for ways to improve upon their current living environment – a more cost-effective solution than searching for an expensive dream home.

The Takeaway for Investors:

Prioritizing rental property renovations is never a bad thing. Not only can they help grow and maintain your equity, but they help attract long-term residents, too. While there may yet be some supply chain challenges to contend with, it’s well worth it to ensure your rental properties are homes that your residents will want to stay in for the long haul.

 

Featured Articles

Posts by Tag

See all