Because I’ve been investing in real estate for so long, people often frequently send me articles about the market. And I always appreciate it, but sometimes it gives me pause—especially when it’s December and I come across an article regarding real estate investing trends for the coming year. Those types of articles are helpful, but if I’ve waited until the last month to start thinking about the next year, I’m in a lot of trouble.
Real estate investing has to be fast, but it is also about looking at long-term trends and how they will impact the market. This is especially important when things are in flux and the market is unstable, like what’s happening now. With the economic reverberations of the pandemic still shaking out, it’s time to start looking ahead to 2022.
We’re likely going to be in an unusual situation for a long time. The smart investor will find the opportunities in an unusual market, evaluate what they have to do, and prepare their business for real estate trends next year and beyond.
This year might seem endless, but it’s time to start thinking about 2022. Here are the real estate investing trends that will matter the most.
Real Estate Investing Trends for 2022
It’s always important to look at the long run, to take in the big picture. But it is especially important now. There are legitimate psychological and economic components that will ripple through the market for the next few years. These will impact each other, and impact how you choose to run your business leading into 2022.
Virtual Real Estate
Hopefully, by 2022 we’ll be able to gather safely. But honestly, we don’t know that yet, and even if there is a vaccine it could be years before people feel comfortable interacting with others. Conducting certain business remotely might be the norm for years to come. That’s just one of the ways that the coronavirus is impacting real estate.
To prepare for this, consider planning to offer more virtual real estate investing services, such as:
- Being able to handle closing paperwork electronically
- The ability to help less tech-savvy clients negotiate apps and e-signings
- Being connected with a network of potential buyers that you don’t have to meet in person (being fluent in virtual is absolutely vital for wholesalers)
By 2022, it will likely be expected that you have virtual capabilities. It would be like not having an email account today.
A “Growing” Economy
This is probably the most controversial item on this list. After all, if you’ve survived falling off a cliff, climbing back halfway up probably doesn’t feel like being on level ground again. But that is what is happening with the US economy.
2020 saw the GDP collapse by 6.5%, after years of consistent growth. From that trench, it is expected to grow 5% in 2021, followed by another 3.5% in 2022. That means it will be above 2020’s pre-pandemic projections—not just reclimbing the original mountain but also climbing the next.
What does that mean for real estate? It means that today’s market is changing. Right now, there are some pretty undeniable benefits to this real estate market. But we can’t really expect that to persist forever.
A growing GDP can mean three things:
- Fewer distressed houses
- Higher prices
- More activity
Now, all of these will vary by region. There’s no one outcome of a growing economy. But if you are planning for a sustained downturn, you need to slowly shift your expectations.
Continued Low Interest Rates
If there is one thing to say about the Federal Reserve, it is that it doesn’t move super quickly. That can be frustrating at times, but it also means it takes the long view. It knows that GDP growth next year doesn’t mean we’re out of the water. Which is why they are determined to keep interest rates low through at least 2022.
In fact, policymakers are nearly unanimous in predicting that interest rates will be near zero through the end of 2022. That’s great news. These low interest rates have kept the real estate market afloat, and that, combined with the improving economy, could open up more cash for more people to buy more houses.
For fix-and-flippers, that means more potential buyers for potentially higher prices. For rental investors, that could mean fewer people renting, which could be a spur to switch your property from passive to on the market. None of this should be construed as specific advice, of course, but low interest rates and a better economy generally means more buyers, and you should consider that while making moves.
More First-Time Buyers
This is a corollary to the points made above. More money, plus lower interest rates, equals more buyers—and in this case, more first-time buyers. In fact, the numbers look promising.
|2020-2022||Up to 9.2 million|
While there will be a lot more people buying, first-time buyers generally aren’t buying the most expensive, glam houses on the market. They are most likely buying starter homes, in up-and-coming neighborhoods as opposed to mansions in neighborhoods that are already fully in bloom.
Again, these are broad trends, but understanding who is going to be buying, and what they tend to buy, is key to planning your moves through 2022.
A Positive Rental Market
Even though there are people buying, there are still going to be plenty of people reluctant to make a big move before they feel more stable (and let’s be honest: it’s going to be a while before most of us feel fully stable again). That’s a positive for the rental market.
Vacancies are decreasing. In nearly every portion of the country, vacancies are down year-over-year, according to the US Census Bureau Housing/Vacancy Study from the third quarter (the last available study).
Overall, fewer vacancies mean higher rental prices. If you are looking to build passive income, a time when more houses are being sold and more people are looking to rent is a good time to explore that potential.
Strange Fluctuations in New Housing Starts
To say that new housing starts have been unpredictable in 2020 is an understatement. Starts rose less than expected, did better than expected, beat expectations, and have shrunk again. The latest reports are also extremely varied across the country. Compared to last year, multifamily home starts dropped 25% in August, while single-family rose 4.1%.
But even that can be misleading. For example, single-family starts dropped 17% in the South and a whopping 33% in the Northeast, with nearly reverse gains in the Midwest and the West.
So in different parts of the country, new housing can be getting tighter. In other areas, it is looser, but multifamily is still tight. In conjunction with what we talked about above, that can mean there are still a lot of buyers and new buyers looking for homes who won’t be in the multifamily/single family new home market.
What does that mean? They’re looking for flips. They’re looking for rehabs. They are looking for the kind of houses that real estate investors can potentially provide.
So where do you find these houses?
We know we said that the economy is recovering. There will be more buyers. But this recovery is not going to be universal, nor will it be even. There will still be a lot of suffering in the country as mortgage grace periods end without full employment coming back.
It is estimated that through 2021 there could be up to 500,000 evictions across the United States.
Right now, we’re not seeing those at the rate expected when the pandemic first hit. That’s because there has been an eviction moratorium (though it has a lot of loopholes). But there hasn’t been any relief in terms of owing mortgage payments. When the moratorium ends, there could be a tsunami of people unable to pay.
This is where real estate investors can come in. People will want to sell before being foreclosed upon, with all the legal and financial burdens that brings. Being able to find the owner of a distressed house and make them an offer before they plunge into a red tape nightmare could work out for both parties. You could get a house to flip, and they could get out of a tough situation with cash on hand.
You just have to be able to reach them.
The Best Way to Approach 2022
Nothing is certain right now. But it seems pretty clear that by 2022 there will be an uneven upswing. While the results of the election could change government responses, we could see a lot of people looking to sell while there are a lot of people ready to buy. That, to me, seems to be a good time to be an independently owned and operated HomeVestors® franchise.
As a franchisee, real estate investors get access to an unparalleled national marketing campaign. You know it—we’re the “We Buy Ugly Houses®” one. It’s been a trusted name since 1996, and when people are looking to sell, they contact HomeVestors. Franchisees then get a qualified lead in real-time, ready to make a deal and get cash for their distressed property. It takes the first and hardest step out of the equation.
More sellers. More buyers. Less new property and more people looking for new places to live. These seem to be the trends heading into 2022 and it is time to start thinking about them. If you want to turn thoughts into actions, request information about becoming a franchisee today. 2022 is just around the corner. Enter the year with a plan in place.