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 sector 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 trends in real estate is non-negotiable.
This article examines five real estate market trends to watch out for in 2023.
Ready? Let's get started!
Real Estate Trends to Look Out for in 2023
If you'd like to invest in the realty market and make decent returns in 2023, 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.
Housing inventory has earmarked a gradual increase since May 2022. While inventory values climaxed by November 2022 (46.8% increment over the previous year), they remained 38% lesser than pre-pandemic 2017 to 2019 numbers. According to projections, 2023 should showcase a similar trend.
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
Home buyers will encounter affordability issues in 2023 and must brace themselves for a tough market. According to a Realtor.com report, the national median home price reached a record high of $449,000 in July 2022 and declined to $416,000 in November 2022. With these figures suggesting a reduction in home price growth, 2023 is forecasted to be a slow growth year.
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.
When the Federal Reserve decided to increase interest rates in 2022, the average rate on the 15-year fixed-rate mortgage increased from 2.80% in January 2022 to 6.38% (its peak for the year) by November 2022. Conversely, the average rate on the 30-year fixed-rate mortgage climaxed at 7.08% by October 2022.
Most industry experts expect mortgage rates to increase in 2023 as the government seeks to combat inflation. Quickly, let's examine what higher interest rates on mortgages mean for home buyers and sellers.
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 off your home.
Trend 4: Virtual Property Tours
According to Matterport, 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 in 2023.
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 as 2023 progresses.
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 in 2023:
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 in 2023 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 in 2023? 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 realty 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 in 2020 and not reaching pre-pandemic values in 2022, you might be scared that it's only a matter of time before the realty industry comes crumbling. Although there's no definitive proof that this will not happen, numerous housing market forecast experts state that a crash in 2023 is improbable.
Although mortgage rates are on an upward trajectory, the National Association of Realtors (NAR) predicts that there'll be a dip as the year progresses. Nonetheless, the housing market will denote low inventories all through 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 in 2023, people looking to purchase homes will become less picky and make do with almost any alternative. This year, it doesn't matter if a structure is in a big city or holed up in an area without 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 have diverse opinions on how the housing market will pan out in 2023. According to Freddie Mac, home prices will witness a 0.2% decline. The National Association of Realtors (NAR) also predicts annual median home prices will grow by 0.3% after a 9.6% increase in 2022.
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.
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!