The number one reason I love investing in real estate is that the market is always changing. It keeps you on your toes and, frankly, I find that exhilarating. Of course, everyone has an opinion on where the hottest real estate investment markets are and they don’t hesitate to share it. Here’s mine: Whether the market has been trending up or down, there’s only one thing we can count on—uncertainty. And, lately the real estate market has been more uncertain than ever.
Since the housing bubble burst in 2007-2009, interest rates have remained reasonable and home buyers increasingly active but, with interest rates now on the rise, people are beginning to squeal and squirm again. You can hear all about it in coffee shops and offices across the country. Everyone is asking the same question: Will the market slow down, and by how much? But, with the right support and know-how, investors don’t have to join in the national anxiety. Those who know how to find a fixer-upper in an uncertain market and turn it into a comfortable home for sale can ride out the ebbs and flows of the market.
Unpredictable Influences at Play in the Real Estate Market
You’ve probably seen the news about housing prices rising year-over-year as the market recovered. Home prices have finally climbed back to pre-recession levels in 20 key metropolitan markets. The home-price index, which measures the repeat sales of single-family homes in these cities, showed a 5.6% annual gain last October, which is comparable to the previous peak way back in July 2006. In large part, this recovery happened because the Federal Reserve kept interest rates low to bring consumers back to the market.
However, the Fed just recently voted to increase interest rates again. This is only the third interest rate hike in a decade, with the last one occurring just three months ago. And, the Fed suggests that there are more to come. People are saying that this is a sign of economic strength. With more jobs being added, the unemployment rate plummeting, and inflation settling, our economy has found its stride again.
When interest rates go up, banks increase borrowing costs to consumers. If rates go up, say, one more point on a current typical current mortgage rate of 4.3% over 30 years for a house that costs $237,000, the borrower would pay an additional $138 per month. That is an additional $50,000 in interest payments over the term of the loan!
So, the question we need to be asking is whether consumers will continue to buy homes when faced with the double whammy of increasingly high prices and rising interest rates. Perhaps the fact that consumers seem to be better positioned in a more stable economy will encourage “business-as-usual” for real estate transactions. Or, maybe consumers will pull away from the market for a time and wait to see how all this uncertainty plays out.
I can gab with the best of ‘em when it comes to real estate forecasting, so of course I’m going to tell you what I think: It doesn’t matter. Probably the market will influence different regions unevenly. After all, some places are wildly overvalued today, like Los Angeles, and others are still undervalued. While it’s important to keep an eye on national trends, it’s more important to stay connected to your local dynamics and be prepared with the right tools and resources to find the real estate investments that make sense.
Finding a Good Investment Deal in Any Market
The key to getting a solid return on an investment property is to generate leads from homeowners who might otherwise struggle to sell their homes. Perhaps the homeowner inherited the house and cannot pay the out-of-pocket expenses to make necessary repairs. Or, maybe they’ve experienced a major change in their life circumstances and can no longer afford to maintain the home? These “fixer-upper” properties spell opportunity for investors willing to put in some elbow grease. Homes that are structurally sound but may have an outdated kitchen, overgrown landscaping, or an aging exterior paint job can be updated with only minor cosmetic changes—and also provide a significant return on your investment. But, how do you find them?
There are lots of lead generation strategies out there but, in my opinion, going with a tried-and-true plan is priceless, and becoming a HomeVestors® franchisee is one of them. They provide strategic tools and resources for generating positive investment equity in any market. To start, HomeVestors® franchisees can leverage the best marketing tools for investors and advertise “We Buy Ugly Houses®,” one of the most widely known national brands in real estate investing, for lead generation. They are much more likely to be contacted directly from homeowners wanting to sell their property quickly. In addition, the proprietary real estate valuation software, ValueChek™, makes it much easier to value properties that need repair.
While we never know for sure what’s going to happen next with so many variables at play in the real estate sector, we can be prepared. For more information on how HomeVestors can help you find fixer-uppers to grow your investment business too, contact a member of our customer service team or put in a request for franchise consideration.
Each franchise office is independently owned and operated.
HomeVestors of America® is the nation’s only real estate investing franchise, providing wonderful business opportunities to real estate and investment professionals across the nation.