Why the Real Estate Market is the Best It’s Ever Been

If you are planning to purchase an investment property or purchase a home, the news is full of dire updates, for buyers, on the real estate market. Real estate prices are through the roof and those with minimal liquid assets, like cash flow tied up in existing investment properties, are facing challenges to fund new properties. 

 

Many areas of the country are prohibitively expensive, including in California, with prices rising at the fastest pace in decades. There are, however, deals to be had, especially for savvy investors with a game plan in place. 

 

Here is what you need to know about the current real estate space, including why there is so much talk about the state of the market and what you can do to make today’s real estate climate work for you. 

 

The State of the Current Market 

As people involved in real estate , and general home buyers, are aware, home prices have been on an upward trajectory for some time now. Desirable metros of all sizes, particularly in states seen as significantly desirable, like California, are watching prices climb and climb – and then climb some more. From 2021 to 2022, prices have risen 20.9% nationally. This can result in houses that are hundreds of thousands of dollars more than they would have been just two years ago. 

 

For those with a home to sell, this has been a huge boon, especially those seeing huge profits that can then be reinvested. However, those looking to buy for the first time or who are trying to save money by downsizing are finding themselves up against a significant challenge. When buyers are priced out of their communities or feel bootstrapped by a lack of desirable properties in their budget, the market certainly looks like a bad place to be. 

 

The situation related to housing prices has not happened in a vacuum and is instead the result of numerous factors over the last several years. By understanding why prices are climbing, it is easier to identify potential openings in the market and where investment dollars are best allocated.  

 

Rising Rents 

Rents are up across the country, with California in particular showcasing sky-high costs across major metro areas and suburbs. In 2021, the median rent for properties with two or fewer bedrooms jumped a whopping 19%.

 

Renting has long been a more affordable alternative than buying, especially for those without the money for a down payment, upcoming relocation plans, or no interest in the costly aspects of ownership, like roof and HVAC repairs, and monthly insurance and tax expenses. Now, with rental prices outpacing a standard mortgage payment in many areas, buying looks like the smarter choice. 

 

The Role of the Millennial Buyer 

There is a lot of chatter about Millennials buying homes, and this discussion is important in how it reflects pricewise in the current real estate market. Millennials, who are now in their late 20s to early 40s, make up 37% of the current market, with growth to come as more members of Gen Y settle down and start families. As such, there is unlikely to be a slowdown in eager buyers prepared to take advantage of whatever is available to purchase.

 

Millennials have long been criticized for waiting to buy homes and have children, but for many, the wait is over. The average first-time homebuyer is mid-30s, which aligns with the median of the millennial age bracket. This means that these adults finally have the savings and the stability to settle down, resulting in an increased demand in relation to the available supply. Many analysts do not expect this trend to end in 2022, either, with projections for pressure put on the housing market until well into the mid-2020s. For those waiting to buy until this heat dies down, this could mean waiting for several years before an opportunity for pride reduction could come along – and that means years of potential income generation wasted. 

 

A Reduction in New Builds 

The consequence of a languishing housing market in the preceding decade is now showing consequences in a new way: a lack of housing inventory. Over the past several years, new construction slowed substantially, resulting in a housing crunch that is too severe to be mitigated with an uptick now. 

 

Around a million new homes per year starting in 2010 would have been required to satisfy the incoming rush of millennial first-time homebuyers. Unfortunately, that was not the case for the better part of the decade, with only the last few years of increased building, has somewhat helped the production need. This has resulted in a lot of demand without an expansive inventory of new homes from which to choose. 

 

The lack of new builds is particularly frustrating for the younger generations, who generally prefer newer construction to old homes. While no two homebuyers are exactly alike, this can be for a few reasons. 

• Millennials want homes that are move-in ready without requiring repairs or renovation 
• Younger generations love their technology, and that includes homes that are designed around smart solutions 
• Input in the design process is also desirable, ensuring owners get exactly what they want out of a property rather than compromising on must-haves 

 

While the shortage in new construction is not good news for those who want a brand-new home, it is a situation where fix and flip investors can capitalize. By understanding the home features millennials want the most and catering renovations to these top qualities, investors can present the next best thing to the generation currently driving the housing market. 

 

Is the Seller’s Market Here to Stay? 

As prices rise and homes in many areas become increasingly expensive, many would-be buyers and investors are sitting back and waiting under the assumption that sooner or later, the tide will turn. Experienced investors, on the other hand, are looking for buying opportunities. Analysts project that 2022 is going to remain a seller’s market, which means that those who want to buy within the year who have high hopes of the situation changing are in for further price increases. Price increases may level out somewhat versus the spikes over the last 18 months, without the reversal many are looking for. 

 

Interest Rates Will Play a Big Factor 

A recent factor has been the rise in mortgage rates are on the upswing in California and in the United States. With the Federal Reserve now raising interested rates twice, all mortgage rates have increased. This is fueling a sense of buyer urgency, contributing to a push to buy now, as shown in prices still increasing, just not at the rapid rate they have the last couple of years. The pandemic may play a role here due to increased activity among borrowers and overall economic changes, but this evolution can be frustrating for those borrowing but beneficial for those with cash to put forward, regardless of the root cause. There are solutions: contact us, mortgage brokers specializing in loan programs to minimize the increased mortgage payments and close your next loan. 

 

Why Now Is the Time to Buy 

So, with the knowledge that the market is in a strong place and is only likely to get more expensive over the coming months, is now the time to buy? Each situation is unique, but we believe it is still a good time to buy. If projections hold, adding to your portfolio of rental holdings or properties to fix and flip will be cheaper now than at any point throughout the rest of the year.  

 

However, this does not mean that you should jump forward with an investment or purchase if it’s not a part of a long-term strategy. Buying just to buy is rarely a good way forward, particularly if you are already busy with current projects. That said, if you were considering acquiring new property late in the year or early next year and come across the perfect opportunity now, pulling the trigger may be a good call. 

 

Market knowledge always plays a key role in getting ahead in real estate investment, and that includes understanding what defines today’s seller’s market – and why it is showing no signs of stopping. If you’re prepared to make an investment property or residential purchase, there is little incentive to wait even more. If your investment strategy allows, this may be the perfect time to take advantage. 

 

Westpark Loans is a nationwide, direct hard money lender. See our Loan Programs and how Westpark Loans can help you fund your next loan with a loan program that works for you! View our Success Stories, Reviews, and learn more About Us. Or, call to speak to a professional Loan Officer at 844-574-5626 today!