Although real estate is known for being a stable and overall profitable market in the United States, the past few years have been unusual due to the Covid-19 pandemic. Because of this, we saw some significant changes in inventory and property prices across the country. However, now that we are approaching a new year, investors wonder if 2022 will bring a more stable housing market. So, stick with us while we go over market predictions, factors that affect housing markets, and rental investment strategies.
2022 Housing Market Predictions
Throughout the height of the pandemic, we witnessed a decline in home prices throughout the U.S. Since these rates were low, many people took advantage of the situation and purchased homes. Unfortunately, this created a supply and demand issue. With so many people buying real estate, there weren’t enough homes on the market to keep up with the demand. Within just days, houses were sold and taken off the market. Because of the high demand and low supply, real estate prices skyrocketed in early 2021.
As we near the end of 2021, we can see that the market will likely start to balance out. However, this doesn’t necessarily mean that prices will go down. Instead, prices could remain at higher rates than average, causing some people to stray away from buying.
If you are an investor looking to purchase real estate at this time, don’t get too discouraged. Although the current mortgage rates are higher than usual, we have some rental investment strategies to help you with the process. But, first, let’s go over some of the predicted market trends for 2022.
Upcoming Market Trends for 2022
Throughout 2020 and 2021, we’ve witnessed many changes in real estate market trends. For example, the number of homes sales increased enough to surpass 2007 sales. Along with that, we saw extremely low mortgage rates and a dramatically increased demand for homes. So, let’s look at some of the predicted trends for 2022.
- Inventory is Expected to Bounce Back- Although we saw increased demand and low supply throughout 2021, the inventory for homes should make a return. This is great for those looking to purchase real estate but has not been able to due to lack of supply.
- Real Estate Will Sell Quickly- Since the demand was so high throughout this past year, once more real estate is added to the market, it will most likely sell quickly. So, if you are looking to purchase a rental property within the next year, it’s wise to make quick decisions and act promptly to win competitive offers.
- Investors Will See Solid Returns- Investors that were quick enough to purchase rental homes while the prices were low will continue to see significant returns from their investments. Since home prices may rise next year, existing real estate owners are in a good position.
- Rising Rent Rates- We’ve seen rental rates grow quite rapidly within the past year. Even though the prices of homes are high, the rising rental rates are enticing to real estate investors. That said, investors will likely continue purchasing homes due to the increased demand and high yields.
- High Demand in Suburban Areas- Since many people transitioned into a work-from-home setting, the demand in suburban areas increased. Although urban areas are more fast-paced, many people no longer need close proximity to work.
Factors that Affect the Housing Market
When it comes to the housing market as a whole, there are quite a few main factors that can affect it. Investors should understand these factors and keep them in mind when purchasing real estate. Let’s go over a few of the most critical factors that will affect the market over the next few years.
- Economic Change
- Supply and Demand
- Mortgage and Interest Rates
- Property Location
- Employment Changes
Economic Change
The economy is one of the most significant factors that affect the housing market. Typically, good indicators include employment data, manufacturing activity, the price of goods, and more. When the economy is flourishing and the unemployment rates are low, the cost of homes tends to increase.
Supply and Demand
Of course, housing prices work no different than the prices of goods and services, and a high or low supply of homes can determine the price. If the supply is low and the demand for homes is high, this is considered a seller’s market. On the other hand, if the supply is high and the demand is low, it’s called a buyer’s market.
Mortgage and Interest Rates
The Federal Reserve has the authority to raise and lower interest rates throughout the year. This can hugely impact the mortgage rates set by lenders. We are currently experiencing inflation, meaning that the Federal Reserve will most likely increase interest rates. In turn, this affects mortgage rates as well.
Property Location
Location is one of the most important aspects of purchasing a home. That said, even if the prices of homes decrease as a whole, they may stay the same or rise in certain areas. Due to desirability, locations with schools, hospitals, highways, and other attractions are likely to have homes that are higher in price.
Employment Changes
As stated before, we’ve started seeing more and more people leave the city and move toward suburban and rural areas due to the shift of working at home. This has increased the demand for homes in these areas. Similarly, we have seen increases in home sales where jobs have been plentiful in the past.
Rental Investment Strategies
Since the housing market has changed drastically over the past few years, so have the strategies associated with buying a property. Now that the demand is high and the supply is low, it’s challenging to buy a profitable rental. However, it’s not impossible—the key to rental investment success is having a good understanding of the market. So let’s look into some rental investment strategies you should adopt while looking for a property in 2022.
Factors to Consider Before You Invest
- Know Where You Want to Buy- Since not all national trends shift to local markets, investors should watch the demands and trends in areas where they are looking to purchase. Failing to do this may result in a missed opportunity. After all, location is one of the most important factors in a rental property.
- Buy When You’re Ready- Don’t cave in to pressure when purchasing real estate. If you aren’t ready to buy a property yet—don’t. Instead, wait until you have a plan, savings, and time to go through the home buying process successfully.
- Know Your Finances- Before you can start investing in real estate, you need to have a solid grasp of what you can afford and how much you’ll need to save before purchasing. If you don’t evaluate your finances before diving into your investment, you may run into money troubles throughout the process.
- BRRRR Investing- BRRRR stands for Buy, Remodel, Rent, Refinance, Repeat. It seems pretty straightforward and is a great way to build a rental portfolio while earning income simultaneously. The BRRRR method allows you to buy homes quickly, add value with remodeling, create income by renting, and then refinance and start again.
- Outsource Daily Tasks- Although most of the time it is unintentional, owning a rental property can become a full-time job quickly, especially if you own more than one property. This is why many investors hire property managers to help with the day-to-day tasks of owning a rental. Although this does mean you are losing some income by paying for management services, most investors that own multiple properties find it completely necessary.
Rental Investment Success in 2022
Now that we’ve gone over some rental investment strategies to keep in mind for the upcoming year, it’s time to go over how to be a successful investor. Although anyone can flourish in this field, it does take time, money, and resources to do so. So, let’s go over a few ways you can be an influential investor in 2022.
Choose a Reputable Real Estate Agent
The professionals that you work alongside during the investment process play a huge role in your rental property’s success. One of the most important people you will work with is your real estate agent. This is one reason why it’s crucial to find someone who is experienced and eager to help. This should be someone you can trust and who will work at your pace throughout the process.
Anticipate Expenses
To maximize cash flow, which is the overall goal, investors should anticipate and minimize expenses as much as possible. A few ways you can do this include:
- Look for the best homeowners insurance rates
- Require tenants to pay utilities
- Require tenants to have their own renters insurance
- Build extra costs, like HOA fees, into the rental rate
Taking these expenses off your plate can help maximize your profits and increase your rental investment success.
Utilize Technology
Most people these days are looking for up-to-date and modern homes in terms of technology. To ensure that your property has these adaptations, consider adding some modern elements. You can do this by installing smart locks, upgrading appliances, and providing extra security to the home. Similarly, you can utilize technology to make things easier for tenants. For example, giving them an option to pay rent, submit maintenance requests, and communicate concerns through an online platform is a great way to maintain a good tenant-landlord relationship.
Hiring Property Management For Rental Sucess
Hiring a trusted property management company for your rental is one of the best rental investment strategies that you can use to your advantage. Luckily, Bay Property Management Group experts are knowledgeable and eager to help you with your real estate investments. Offering services like tenant screening, rent collection, handling maintenance requests, and bookkeeping, our professionals are here to help your rental business succeed.
Whether you are just getting started in the rental property industry or you have multiple properties already, Bay Property Management Group can provide you with a stress-free management experience. If you need a property manager in Maryland, Pennsylvania, Virginia, or Washington D.C., check out our complete list of management services and give us a call today.