Real estate has long been a popular choice for savvy investors. Though the economy has changed shape significantly in recent years, it hasn’t changed the promise that’s afforded by a real estate purchase. If you’re looking for a relatively safe place to put your money with the promise of future returns and steady long-term growth, real estate is definitely an opportunity you should consider.
The Current State of the Economy and Real Estate
The United States enjoyed an extended period of historically low interest rates prior to 2020. However, the COVID pandemic had an unprecedented impact on nearly every part of day-to-day life, including the state of the economy. Economic growth in the US was -3.4% in 2020 and included the worst economic quarter since 1948, with growth of -9.1%.
Despite the challenges of 2020, the economy has rebounded impressively, displaying 6.9% growth in 2021. Even against a turbulent background, the stock market actually performed very well through 2020 and 2021, with the S&P 500 delivering returns of 18.4% and 28.71%, respectively.
This creates a complex and often confusing situation. Though consumer spending increased 2.7% in the first quarter of 2022, the GDP fell by 1.51%, contracting for the first time since 2020. Consumers have a widely pessimistic view of the economy. A Wall Street Journal poll revealed that 80% of those surveyed feel the economy is “poor” or “not so good.” Meanwhile, a CBS News poll indicated that 69% feel the state of the economy over the last 12 months was bad.
Opinions are mixed on whether the United States will enter a recession. However, many factors point toward an economic downturn at the least. Rising inflation has caused many Americans to put luxury purchases on hold.
Real estate sales are hardly immune to these rising prices. The median home sales price jumped 10.8% from $364,600 in July 2021 to $403,800 in July 2022. However, properties stayed on the market for an average of just 14 days in July 2022, compared to 17 days the previous year. Despite the state of the market, real estate still presents some powerful investment opportunities worth considering.
Reasons to Invest in 2022
Though the state of the economy may look concerning in the coming years, it doesn’t mean that real estate investing is no longer a smart choice. In fact, real estate remains one of the safest and most stable options during these difficult times. Real estate is a long-term investment that will likely appreciate over time. Equity earned in your investment today can fund additional real estate opportunities in the future.
A valuable real estate property can also help shore up your finances by providing regular cash flow. Investing in a rental property is a wise choice that can yield continual income. Long-term rentals may prove a more lucrative choice in the current economy. While many families are cutting back on luxuries like vacations, a safe and stable home is still a necessity.
If you’re equipped to tackle a fix and flip project, you can get into real estate investing at a low price and generate a profit rather quickly. As mentioned above, though home sales have slowed, properties are still moving off the market at a regular pace. In fact, over 80% of properties are on the market for less than a month.
Real estate is an effective way to diversify your portfolio and protect against some of the instability of the economy. Though prices may ebb and flow, they typically rise long-term. Investors who got into the market a few years ago are certainly seeing a significant increase in their property values now. Purchasing real estate as soon as possible can help you build wealth too.
What Buyers and Renters Want
It’s important to choose your properties carefully when you’re investing in real estate. Keep your finger on the pulse of the industry so you know what buyers and renters are looking for most. Currently, single-family and multifamily rentals present great opportunities for investors. With home prices increasing rapidly, many young families and first-time home buyers find they’re currently priced out of purchasing a property. This leaves a growing number of individuals looking to the rental market for their residential needs.
In the third quarter of 2021, investors made 18% of single-family home purchases. Though purchasing a home presents a challenge for many families, people are still looking to relocate. The increase in work-from-home opportunities that have blossomed due to the COVID pandemic has caused many individuals to reconsider their living environment. Since living in a congested city is no longer a requirement for many jobs, people are increasingly moving to more rural locations.
Market growth is highest in southern states. Of the 811,000 newly constructed homes that were sold in December 2021, only 3% were in the northeast, and 56% were located in the south. The top markets to watch, as identified by PriceWaterhouseCoopers, are all in the south, including Nashville, Tennessee; Raleigh/Durham, North Carolina; Phoenix, Arizona; Austin, Texas; and Tampa-St. Petersburg, Florida.
Real Estate Investment Opportunities
You can invest in real estate in many different ways. The most straightforward of these is simply investing in a home for your own family. Homeownership is a powerful investment, particularly if you’re currently renting. Rather than pouring money into someone else’s pocket, owning allows you to invest continually in your own financial future.
Alternatively, you can invest in a property that you plan to hold, flip, or rent. All three approaches typically promise to deliver future income. You can begin collecting that income on a steady, monthly basis to supplement your income from other sources, or you can hold onto your property for a future sale when the value is higher.
If you’re ready to take advantage of the perks of real estate investing, we can help. Titan Funding will help you evaluate your investment opportunities and find the right approach to your goals. Whether this means purchasing the property upfront or lending your capital to a real estate fund managed by another professional, there’s an approach that will suit your strategy.