Exploring the Top 5 Emerging Trends

Staying Ahead in Real Estate: Tracking the Latest Industry Trends

Real estate ranks as one of the most profitable industries for investors. With ever-changing trends, this real estate sector insight has its fair share of highs and lows. But in the past few years, the real estate industry has grown due to an uptick in demand.

If you're looking to invest in this profitable market, you probably want to know how long the realty industry will remain on this upward trajectory.

To make informed investment decisions bound to yield substantial ROIs in the long run, getting context on the latest real estate market trends is non-negotiable.

This article examines five real estate market trends to watch out for.

Ready? Let's get started!

Real Estate Trends to Look Out for

If you'd like to invest in the realty market and make decent returns, getting a hold of these five real estate future trends are essential:

Trend 1: Low But Rising Home Inventory

The housing market has been plagued with low inventory for some time. A low housing inventory means buyers will spend more on homes because demand exceeds supply. Although this real estate trend peaked in 2020, things are slowly returning to normalcy.

With home prices reaching record highs and continuing to climb in many markets, concerns may arise about a potential bubble ready to burst—similar to the 2008 financial crisis. The likelihood of a housing market crash continues to be low as we approach 2025, despite the potential for a rapid decrease in inflated prices due to waning demand.

How Low Inventory Will Affect Buyers

As a buyer, low inventory means you'd need to be proactive during house hunting as there's an increased chance the best newly listed properties will be off the market in the blink of an eye. In November 2022, homes spent an average of 56 days on the market — 18 days lower than the obtainable in 2017 to 2019.

This timeframe reduction means home buyers don't have much time to search for properties that suit their requirements in the real estate market.

To find a decent home in record time, adopt these suggestions:

• Tick Off Certain Requirements

In a low inventory market, you might not find a home that suits your precise requirements. As such, you'd need to give up luxurious add-ons for essential fittings. You can do this by purchasing an inexpensive property and upgrading it as time passes.

• Expand Your Horizons

If you realize that the area you're focusing your home search on is super competitive, it'll be best to look elsewhere. You'll be pleasantly surprised to discover a great structure in a nearby neighborhood that gets a little publicity.

To simplify your search, we recommend hiring a real estate agent to find a home tallying your requirements and budget.

• Get Pre-approval Immediately

Mortgage pre-approval is essential in a housing market characterized by low inventory. If you don't apply for one before your home search, you'll lose out on an excellent structure to a pre-approved buyer.

How Low Inventory Will Affect Sellers

Under low inventory conditions, home sellers stand to benefit the most as there's less competition due to high demand in the real estate industry. You'll receive a myriad of offers if you're selling a home wielding excellent features and located in a prestigious neighborhood.

Although high mortgage interest rates might reduce the number of home buyers fixated on your listing, note that you'll still get offers if the structure's decent.

However, getting a great deal isn't 100% guaranteed. Here are some ways you can take advantage of a low inventory market:

• Make the Asking Price Reasonable

If you're selling homes in a low-inventory housing market, place reasonable asking prices on your listings. This amount should be below its market value — a figure sourced by researching how much similar nearby properties sold for recently.

In a multiple-offer scenario, towing this route allows buyers to outbid each other. As such, you can take the best deal and make substantial returns.

• Look Beyond the Best Deal

It's easy to go with the highest bidder when faced with multiple offers. But before accepting any, review the buyer's finances and contingencies. That way, you'll eliminate any chances of the deal falling through.

Trend 2: Home Prices Are Still Rising

U.S. home prices continue to set records. The S&P CoreLogic Case-Shiller Index shows a 4.1% annual increase in January 2024. This marks the 20th consecutive all-time high. However, growth has moderated compared to previous years.

Mortgage rates have dipped to 6.64%, staying below 7% for 13 straight weeks and fueling stronger spring homebuying demand, with purchase applications up 13% year-over-year.

The typical U.S. home value now sits at $361,263, up 2.1% from last year, while NAR projects that a potential rate drop to 6% in 2025 could make homeownership accessible to 6.2 million additional buyers.

Since there'll be increased buyer demand due to low housing market inventory, prices in diverse real estate markets won't hit rock bottom. Although monthly dips are likely to occur, home prices by the year's end will be higher than the values prevalent at the start.

How High Home Prices Will Affect Buyers

Before you purchase homes in a pricey market, understanding what you can afford is essential. While you might want to go all out to buy a real estate property after getting frustrated by financially-buoyant buyers outbidding you, stick to your budget!

Agreed, waiting for a home that suits your needs and finances can be daunting, especially in a highly-competitive real estate market. However, you'll be glad you lived within your means as the chances of encountering a substantial mortgage you can't pay off are practically non-existent.

How High Home Prices Will Affect Sellers

Higher home prices equal higher returns for sellers. This scenario is excellent as it aids your next home purchase. To get a juicy deal on your home, it'll be best to work with a real estate agent that understands the ins and outs of your vicinity's realty market.

As a seller, don't be desperate. If you are, specific home buyers might take advantage and cajole you into accepting a low number. But by biding your time, you'll find an offer that earns you the most ROI.

Trend 3: Increased Mortgage Interest Rates

The interest rate on your mortgage is the fee a lender charges for borrowing money, and is typically determined as a percentage.

Mortgage rates continued their upward trend this week, with Freddie Mac adjusting its year-end projection for the 30-year fixed rate upward to 6.4%, a significant increase from its earlier estimate of 5.9%.

The 15-year fixed mortgage rate also saw a slight weekly increase, rising to 6.12% from 6.08%, while the average 15-year refinance rate experienced a modest decline to 6.17% from 6.20%. As of April 18, data showed the 30-year fixed rate averaging 6.96%, with other loan types following similar patterns: 20-year fixed at 6.87%, 15-year fixed at 6.11%, and 10-year fixed at 5.97%.

Government-backed and jumbo loans remained even higher, with FHA 30-year mortgages averaging 7.37% and jumbo 30-year loans at 7.01%. These rising rates reflect ongoing market adjustments to inflation concerns and the Federal Reserve's monetary policy, creating challenges for prospective homebuyers and those looking to refinance.

How High Mortgage Rates Will Affect Buyers

Increased mortgage rates can impact housing affordability. So, if you aren't ready to purchase a home yet, don't pressurize yourself. Also, don't let rising interest rates deter you; they're fulfillable as long you key into affordable housing.

How High Mortgage Rates Will Affect Sellers

Higher mortgage rates will denote an increase in unmotivated buyers. So, while you might have been used to houses getting checked off your listings in record time, you'll now need to wait for extended periods to sell your home.

Trend 4: Virtual Property Tours

Listings hosting a 3D virtual tour sell 31% faster and close at values 4-9% higher than their actual sales price. If these figures aren't enough to convince you that this commercial real estate trend is worth focusing on, there's more!

A report from Realtor.com states that real estate listings featuring virtual tours usually garner 87% more views than realty listings without them. Furthermore, 54% of home buyers skip property listings without virtual tours.

At this juncture, you're probably wondering how relatively technology like virtual tours ventured into the housing sector to become one of the many market trends for real estate.

When the pandemic struck and put the world at a standstill, home buyers needed to view the inner workings of properties they were interested in without breaking COVID-19 lockdown protocols.

Real estate agents started using 3D virtual tours to advertise their listings as time passed. Within weeks, it became the go-to marketing technique for numerous realtors, letting clients view listings from their home's convenience.

Now that the world has returned to normalcy, are virtual tours still important? The answer to this question is a resounding yes! 3D virtual tours will still be critical to home-buying.

But an evergreen question remains — how can I utilize 3D virtual tours? To use this commercial real estate trend to your advantage, we recommend engaging the services of virtual tour services like Matterport and Metroplex360.

Trend 5: Increased Accessibility to Risky Home-Buying Alternatives

This year, the "no risk, no reward" tagline will take center stage in the home-buying arena. Let's examine some of the risky ways you'll be able to purchase a home:

• Rent to Own

A rent-to-own deal is one where an individual agrees to rent a real estate property for a stipulated period. Once this timeline elapses, they'll automatically become owners. Note that this period could range from several months to years.

One major advantage of this contract is that you won't need to make a downpayment to move into the property. However, the rent-to-own contract hosts numerous disadvantages.

First, your rent becomes astronomic as you also make payments that'll see you attain ownership in the long run. But with rent values increasing all over the United States, entering a rent-to-own agreement can leave you bankrupt unless you've got deep pockets.

It gets worse:

If you're no longer interested in owning the property, you won't get the amount you paid toward the total acquisition. So, you've invariably wasted funds! Coupled with the fact that you'd have to shoulder maintenance and repair costs, the rent-to-own home-buying agreement is one of the most wasteful ways to acquire a real estate property.

• Down Payment Loans

Another risky way to purchase a home is by collecting a loan to settle the structure's down payment. Doing this is like borrowing the whole house's cost.

Purchasing a home without putting funds down is a terrible idea. In an ideal situation, you should make a down payment that covers 5-20% of the property's actual value. Paying anything less makes it almost impossible to meet your financial goals, as you'd be busy settling astronomical interests tied to the loan.

NOTE: Most lenders don't offer down payment loans. Although routes for this endeavor still exist, going through with them could lead to mortgage disqualification.

Not Buying or Selling Real Estate? Here Are Some Things You Should Know

You might think the new real estate trends listed above don't affect you as you neither buy nor sell real estate properties. If you're among this set, here are some important facts you must know:

1. A Market Crash Is Highly Unlikely

With the real estate sector hitting a rough patch and not reaching pre-pandemic values, you might be scared that it's only a matter of time before the realty industry comes crumbling. Although there is no definitive proof that this will not happen, numerous housing market forecast experts state that a crash is unlikely.

Although mortgage rates are on an upward trajectory, the National Association of Realtors (NAR) predicts a dip as the year progresses. Nonetheless, the housing market is expected to maintain low inventories throughout the year. These scenarios will create competition in the house-buying arena and maintain steady home prices.

2. Buyer Interests Broaden

Due to increased house prices, people looking to purchase homes will become less picky and settle for almost any alternative. This year, it doesn't matter whether a structure is located in a big city or in an area with limited access to basic amenities; sellers will receive offers regardless.

If you feel the structure you own in an unpopular area won't earn you the dividends you seek, you're wrong. Buyers abound, and you only need to market the property and wait!

3. Stabilized Equity

Many economists hold diverse opinions on how the housing market will unfold. According to Freddie Mac, home prices are expected to decline by 0.2%. The National Association of Realtors (NAR) also predicts annual median home prices will continue to increase.

Although these reports might seem contradictory, one thing's certain — home prices will remain almost the same as in 2022. If you sell your property, you'll make a decent profit. However, if you decide to keep it, don't fret, as your equity will increase slightly.

Navigating the Dynamic Real Estate Market for Success

If you're interested in buying or selling realty properties, understanding the real estate industry trends bound to take precedence is critical.

This year, expect low housing inventory, increased home prices, higher mortgage rates, 3D virtual tours for realty advertising, and riskier home purchasing alternatives.

By monitoring these current trends in the real estate market at every turn, you can make informed investment decisions that'll yield positive ROIs in the long run. Godspeed!

Staying in sync with the emerging real estate trends as a realtor is vital to understand this dynamic market. But if you're still finding it challenging to score clients, consider tuning into the Icons of Real Estate Podcast. Each episode features a real estate professional granting vital insights into the topsy-turvy market and how realtors can edge the competition. Subscribe to our channel today!