Why We Are Entering the Best Real Estate Market Opportunity Since 2008

It’s crucial to review the current real estate market if you’re thinking about investing in real estate this year. The current real estate market has high interest rates, which can deter homebuyers because they might not be able to afford those monthly payments. Many professionals in the industry foresee home-buying activity to be quieter than it typically would be for the first quarter of the year. Typically, many homes sell within the first three months of the year, but because of those high interest rates, that might not be the case for 2023.

However, this means current homeowners might build more home equity during this time, which is ideal. Additionally, industry professionals project mortgage rates to remain high for the first few months. First-time homebuyers might wait to purchase in the new year because of high home prices, mortgages, and interest rates. Professionals encourage home-buying if you can afford it despite the high interest rates because rates change, but the fixed purchase price remains the same when you sell.

It’s vital to remember that the market can evolve month to month, so be on the lookout for various changes that could affect your investments.

Key takeaways:

• You can earn potential passive income by investing in real estate.
• You might find higher interest rates beneficial for an investment.
• You may have more properties to choose from because of the market’s surplus and high interest.
• You might notice lower home prices due to a housing market correction.
• You can take advantage of this opportunity by researching, planning, and working with industry professionals.

Benefits of Investing in Real Estate

The benefits to investing in real estate include earning a passive income, building equity, and getting tax breaks. The main goal of real estate investing is to increase the value of property over time. Increasing the value of your estate means, if you were to sell your home, it would ideally sell for more than you originally purchased it. This is known as price appreciation.

If you’re looking to become a real estate investor, an important factor to consider is if you want a residential or commercial building. Many people choose residential buildings such as homes, townhouses, and condos, which have an inexpensive upfront cost. Usually, commercial buildings include spaces like retail stores or office buildings, which can have more upfront costs with longer leases than residential ones.

Why This Current Real Estate Market Is the Best Opportunity Since 2008

Reasons the current real estate market offers the best investment opportunity since 2008 include:

Enhanced Interest Rates

The interest rates are high right now, which might make you think it’s not an ideal time to purchase a home. However, as a real estate investor, enhanced interest rates can reduce the number of buyers who can qualify for a mortgage. If fewer people are trying to apply for mortgages, fewer individuals are buying homes. For investors, this means less competition.

Increased Availability of Properties

The increasing availability of properties is also due to high interest rates and the current state of the real estate market. With fewer people getting houses because they can’t afford the rising monthly payments, more estates are available. You can invest in these as rental properties for people who can’t afford to purchase a home with high interest fees. Additionally, construction companies anticipate building more properties, which adds to the available inventory.

Lower Prices for Homes Due to the Housing Market Correction

When you’re looking at homes, you might find the prices are lower than they were a year or two ago. This is because of the housing market correction. A housing market correction occurs when a property’s price drops below 10% of its peak market value, which can happen when home sales slow, causing increased market inventory. A correction differs from a crash because a correction is slow, while a crash is sudden. While a correction sees home prices drop 10%, crashes are closer to 20%.

Additionally, the supply and demand chain levels out in a correction, compared to a crash where supply continues to increase while the demand drops. A correction is necessary to restore balance so people can purchase homes. As of this year, the housing market correction varies by location.

How To Take Advantage of the Real Estate Market Opportunity

Here are a few steps you can follow to take advantage of the current real estate market opportunity:

Do Market Research

The first step is to do market research, which provides crucial information about your potential investment, such as the desirability of a specific location or neighborhood. Researching the local real estate market also helps you learn about the location’s economics, including average rent or mortgage payments. This information tells you about the financial health of possible tenants of your real estate investment.

Create a Budget

Next, it’s time to create a budget. Developing a budget is vital when creating a plan to invest in property because it helps you understand monthly costs like insurance and property taxes. An account of your running payments can also help reduce the number of unexpected fees you might incur. A real estate agent and financial lender can help you find an affordable property.

You might also find it helpful to create a budget to detail property maintenance costs, such as upgrades and repairs. Upgrading a home might cost a substantial amount of money upfront, but it can increase the chance of adding value to the home.

Consider Financing Options

After you’ve finalized your budget, you know how much you can spend, which allows you to consider your financing options. First, get preapproved by a lender to understand how much you can borrow if you plan to take out a loan. You might find it beneficial to get preapproved by several lenders, which can increase your chances of getting a property if multiple financial institutions trust you. Here are four types of loans you can use when you’re investing in real estate:

• Conventional bank loans: Conventional bank loans require a certain percentage of a down payment, typically 20% to 30%. Lenders look at your credit score and history to consider approving you and to determine your interest rate.
• Hard money loans: If you’re looking to invest in a property to flip it, consider a short-term loan such as a hard money loan. With this loan, however, fees such as closing costs might be higher.
• Private money loans: Private money loans are financial exchanges and deals between two individuals, usually family members or friends. If you don’t have friends or family members who can lend you money for an investment, you can find private money loans at network events for real estate investors.
• Home equity loans: Home equity loans refer to the different ways you can borrow a percentage of the home’s equity to complete various tasks, such as updates and repairs. Choose between options like fixed-rate home equity loans, home equity lines of credit, and cash-out refinances.

Work With a Real Estate Agent

Finally, work with a real estate agent. These are trusted experts in their profession, and they can help you find what you’re looking for in an investment property. You might think you can handle the task on your own, but purchasing a home involves many elements, and a real estate agent can help the process go smoothly and efficiently. These professionals understand the best marketing and purchasing strategies.

Additionally, you might get access to off-market listings because real estate agents have connections with others in their industry. An off-market listing might be exactly what you’re looking for, but you wouldn’t have had access to it if you decided to work independently.

In Conclusion

The current real estate market might not be the best for first-time homebuyers. If you find a home you want to invest in within your budget, however, the market encourages you to purchase it despite high interest rates. Interest rates vary over time, but the price you bought the property for remains the same. So, if you sell the property and it has increased in value, you might earn back the money you spent on interest.

Additionally, professionals predict the first half of the year to be slower than previous years because of interest and mortgage rates. This might result in more inventory to choose from when investing.

Here are a few tips to keep in mind if you want to take advantage of the current real estate market opportunity:

• Research the market.
• Develop a budget.
• Apply for finance options.
• Work with real estate professionals.

If you’re ready to invest in real estate, consider talking to our team at Anderson Advisors about getting a real estate asset protection plan. We can help you learn how to protect your wealth and properties and potentially reduce your taxes.