You know that investing in real estate is one of the best ways to increase your net worth. For most Americans, real estate equity is the largest source of their wealth. But with the market at all time highs, should you buy real estate now? Many experts believe that the real estate market will not fall in the next two years. See the excellent article written by Russell Price, Chief Economist of Ameriprise Financial “Is housing in a bubble?”.
For 2022, the general consensus is that the market will cool down to a more normal rate of growth (around 4.5%). Supply and demand forces have and will continue to support market prices. Rents are also at an all time high and will support good rates of return on current purchases.
A buying opportunity may arise if foreclosures dramatically increase. This is very possible and perhaps probable. Since the beginning of the pandemic, Uncle Sam has artificially slowed foreclosures and prevented tenant evictions. Currently, the phasing out of these restrictions will put pressure on increased foreclosures.
To summarize, you can buy in this market and make money. Your profits won’t be 20+ percent per year as we have seen in the past twelve months. However, long term investors, (buy, rent and hold), should continue to look for and purchase values in today’s market. Flippers, short term investors (buy, renovate, and sell), are having more difficulties in the current environment. Even Zillow decided to abandon the fix and flip market! The margins are getting squeezed by the slowing market increases as well as escalating costs of materials and labor.
Let me know what trends you are seeing in the real estate market.
David Snyder, CPA