The Top Real Estate Investment Trends for 2018

As humans, we have something of a penchant for wanting to predict the future. Or at least trying to. From the oracles of Greece to late night television shows guessing who will win an Emmy this year, we are enthralled by future possibilities. Even if we don’t buy into today’s pop culture fortune tellers, we still spend time thinking about our own future— especially when it comes to real estate investing.

And it’s important that we do spend the time looking ahead to analyze trends that may impact our real estate investment business potential. If the housing crash taught us one thing, it is that predicting too far into the future may not be realistic, but looking toward the year ahead is only sensible. In doing so, we can plan out an investment strategy to achieve the greatest potential returns. With that in mind, here are the top real estate investment trends that I can see playing out in 2018.

The Major Real Estate Investment Trends Shaping Up Nationwide

Let’s begin by analyzing the nationwide market as it stands currently. Naturally, we want to base our predictions on these cold, hard facts rather than a crystal ball. So, here’s a handful of market-shaping facts about how we’re ending 2017 that will continue to have influence moving forward this year:

According to recent reports, there are 12% fewer homes on the market than a year ago.

The value of U.S. homes rose by 6.9% year-on-year. This puts them back around pre-crisis peaks.

The S&P CoreLogic Case-Shiller National Home Price Index was up 6.2% year-on-year in September.

Rent prices are up an average of 2.1% compared to last year.

The average household size has shrunk to lower than pre-recession rates. Smaller homes are trending now.

Single-family rentals leveled off in 2017.

Putting this all together, it looks like investing in smaller, moderately-priced homes was the best bet and, whether you’re a buy-and-sell or buy-and-hold investor, you likely achieved decent returns this year.

Real Estate Investing Predictions for 2018

Increasing rent and house prices across the country probably added equity to your 2017 real estate investments, but you may be wondering whether now is the right time to cash out on your properties should the market shift. Many investors will be bullish. It’s easy at look to tight available housing inventories and shrinking household sizes (most likely caused by Millennials flying the nest) as signs that demand will increase even more in the new year. But does it get more complicated than that? Here are three real estate trends to watch for in 2018:

1) Inventory Shortage to Continue For Much of the Year

In most markets around the country, inventory in the lower and middle price ranges is so tight that homeowners are hesitant to sell in case they can’t find another affordable home to buy. We can well imagine that the continued tight inventory in these price ranges will exacerbate rising home prices—at least for the first part of the year. But, even when inventory does rise, as expects it to, the loosening in inventory will only be seen in middle to upper price points first.

The good news is that you can still find existing properties to rehab and attract buyers while sales prices are on the rise. Ugly houses and distressed properties are excellent investments during periods of tight inventory. As the new federal tax bill comes into effect, you can imagine that there will be many more homeowners in financial distress that need to offload their home fast. This is the opportunity you’ve been waiting for!

Fixer-uppers for sale will provide a level of flexibility to investors in a way that few other property types can. As tight inventory forces more Millennials to continue renting while rent prices rise, a buy-and-hold strategy can reap rewards in the long run. At the same time, soaring sales prices mean that investors who want to get in and out can buy, renovate, then sell a distressed property to still turn a potentially healthy profit on the project.

2) Death of the Luxury Market

The luxury market was considered a safe haven following the Great Recession. After all, the brunt of the economic decline fell on the 99%; the one-percent still had enough liquidity to afford to purchase luxury apartments in the world’s most popular cities. That’s changing, however. Look to the New York skyline today and you may see more luxury apartments than a decade ago—but many are now sitting empty. In the third quarter of 2017, the luxury market in New York City experienced a fall of 23% in average sales price. At the same time, the average time on market for a luxury apartment rose 27.8% to 101 days, according to industry reports.

As an investor, you aren’t going to find any value in luxury properties in 2018, which is just as well because if you’re like myself and many of my investor friends, you can’t afford them anyway. House prices tend to be higher in city centers—Manhattan and San Francisco, for example—whereas suburban areas will remain relatively more affordable. As home buyers are priced out of city-center markets, we will see a greater migration to the suburbs.

That’s why the suburbs are where you should be looking to find your next investment. Forget Manhattan, San Francisco, and Chicago Loop, instead look to the Bronx, Oakland, and Avondale in 2018. Single-family homes will dominate—and you shouldn’t find it hard to uncover a distressed diamond in the rough if you have the right lead generation strategy.

3) The Rise of Millennials

Millennials already comprise the largest segment of home buyers and will remain the dominant force in both sales and rentals markets in 2018. The National Association of Realtors anticipates that Millennials could make up 43% of the total number of people taking out a mortgage by the end of next year. As popular markets like New York and San Francisco continue to remain out of reach for many Millennials and corporate employers such as Amazon, Facebook, and Google look to expand into new regions, opportunities for this generation to move throughout the country will only increase. Of the 10 cities that Trulia has pegged to experience serious growth in the year ahead, eight are in the south or the midwest. As we move into 2018 then, Millennials won’t just continue to dominate the housing markets in technology hubs, they will become more evenly spread across the country.

Whether your strategy is to rent or sell, Millennials should become your target market. If you fail to target Millennials, you may fail to sell or rent out your property. There are some things that you can’t change—property location or internet signal, for example. But there is a lot you can do to attract Millennials to your investment property. Making the property pet-friendly is a big start. If you weren’t already aware, Millennials love their pets. Over 50% of millennial households own a dog, 37% of them adopt a pet. Making renovations with a focus to pleasing their furry friends will be a significant key when it comes to gaining the attention of the growing Millennial market segment.

Finding Leads with HomeVestors®

Are you set up to take advantage of these trends in 2018? I know I am. But that’s because I’ve got the backing of HomeVestors. As an independently owned and operated HomeVestors® franchisee, I can draw on the proven training, tools, marketing and experience offered by HomeVestors to significantly grow my business in the year ahead. Because of the nationally-recognized “We Buy Ugly Houses®”  marketing campaigns, distressed homeowners in my area will come directly to me when they want to sell. I can then buy and renovate these rundown properties then sell to the biggest group of homebuyers—Millennials.

If you are looking to grow your real estate investing business in 2018, talk to HomeVestors today.

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