Real estate investment: A wise choice for 2023? - Poplar Homes (2024)

FAQs

Is 2023 a good year for real estate investment? ›

Despite what some may think, 2023 is still a good year to invest in real estate, thanks to advantages like long-term appreciation, steady rental income, and the opportunity to hedge against inflation. Mortgage rates are expected to decline, but the housing market is likely to remain competitive due to low supply.

2023 is a balanced year for housing supply and demand. This is ideal for retail purchasers and rental property investors. No longer a “seller's” market. Rising interest rates raise the monthly mortgage payment, which reduces homebuyers and lowers property values.

The combination of persistent buyer demand and low inventory has driven property prices up. There are fewer sellers, so prospective buyers need to contend with higher housing prices. As such, if you buy a home in 2023, you're likely to pay a premium.

Along those lines, organizations like Fannie Mae and the Mortgage Bankers Association forecast that the average rate on 30-year fixed-rate mortgages will decline throughout 2023, continuing into the first quarter of 2024.

With mortgage rates declining faster than expected, home prices are likely to remain mostly flat throughout 2024. This will be good news for buyers who have been waiting on the sidelines for a good time to enter the market.

Economic factors, such as inflation, have a direct impact on the real estate market. As with other goods and services, real estate prices may rise alongside inflation. This is due to the fact that real estate is commonly considered a safe and stable investment that can be used to combat the effects of inflation.

According to the CoreLogic HPI Forecast, home prices are projected to continue their upward trajectory. The forecast indicates an expected month-over-month increase of 0.8% from March 2023 to April 2023 and a year-over-year increase of 4.6% from March 2023 to March 2024.

Will recession impact real estate? ›

Will house prices go down in a recession? While the cost of financing a home typically increases when interest rates are on the rise, home prices themselves may actually decline. “Usually, during a recession or periods of higher interest rates, demand slows and values of homes come down,” says Miller.

Chicago, IL MSA: The forecast for the Chicago MSA suggests a moderate increase in housing prices. In May 2023, prices are predicted to rise by 0.3%, followed by a slight growth of 0.1% in July 2023. However, the most significant increase is expected in April 2024, with prices projected to rise by 1.5%.

Federal tax benefits

Because of the many tax benefits, real estate investors often end up paying less taxes overall even as they are bringing in more income. This is why many millionaires invest in real estate. Not only does it make you money, but it allows you to keep a lot more of the money you make.

To become a real estate millionaire, you may have to own at least ten properties. If this is your goal, you need to accumulate rental properties with a total value of at least a million.

So far in 2023, the Fed raised rates 0.25 percentage points twice. If they hike rates at the May meeting, it is likely to be another 0.25% jump, meaning interest rates will have increased by 0.75% in 2023, up to 5.25%.

Specifically, the end of May and June typically see the most home sales. However, summer is often cited as the most expensive time to buy a house — with prices potentially as much as 10% higher. This is partly because many families want to purchase a house before their children start a new school year.

Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point. Figures are the predicted quarterly average rates for the 30-year fixed-rate mortgage.

The Cheapest Option: REITs—$1,000 to $25,000 or more

A REIT offers the investor a relatively high dividend as well as a highly liquid method of investing in real estate. Most real estate investments are not easy or quick to get out of. An exchange-traded REIT is. Moreover, you can start small with a little bit of cash.

How to invest 150k in real estate? ›

The predictions made by the various analysts and banks provide insight into what the financial markets anticipate for interest rates over the next few years. Based on recent data, Trading Economics predicts a rise to 5% in 2023 before falling back down to 4.25% in 2024 and 3.25% in 2025.

If you need to be occupying your home by a certain date to save on rent, it's a much better deal to close at the end of the previous month (for example, January 30) instead of the beginning of the current month (February 1).

“Returning to mortgage rates of 3% or 4% is not going to happen, in my view,” says Yun, who points out that historically rates have been higher. The low rates of 2020 and 2021 were “unique” and those that got them were “lucky,” he says.

After falling in 2023 and 2024, home prices are predicted to plateau in 2025 before rising again at just above the rate of inflation. However, due to the spike in home values from 2020 through 2022 due to record-low mortgage rates, median sales prices will take at least until 2027 to regain the highs of mid-2022.

Holding long-term fixed-rate investments, such as long-term bonds, fixed annuities, and some types of life insurance policies, during inflation can be bad because their returns may not keep up with inflation.

Long-Term Security

Real estate is a long-term investment, meaning you can hold it for several years as you wait for it to appreciate. At the same time, if you rent out your real estate you can earn monthly income while you wait for your property's value to rise.

Fannie Mae expects U.S. home prices to fall -1.2% between Q4 2022 and Q4 2023, and then another -2.2% between Q4 2023 and Q4 2024.

What are economists predicting for the US housing market in 2023? ›

“Continued inflation, overall higher interest rates, a potential recession and geopolitical tensions will force 30-year and 15-year mortgage rates up throughout 2023, and will bring the two rates closer together as short-term risks rise,” says Dennis Shirshikov of real estate website Awning.com.

Mortgage Bankers Association: The trade group's latest forecast has U.S. home prices, as measured by the FHFA US House Price Index, falling 0.6% in 2023 and another 1.4% dip in 2024. It then expects national home prices to rise 2.1% in 2025. (Forecast updated on April 17, 2023).

In addition, during recessions, people with access to cash are in a better position to take advantage of investment opportunities that can significantly improve their finances long-term.

Some of the pros of buying a house during the coming months, whether we get the recession label or not, include: Potential decrease in home prices. Lower likelihood of getting into a bidding war. Ability to refinance in the future with lower interest rates.

Many shoppers may have second thoughts about buying a home during a recession due to uncertain economic conditions. Consequently, this lower buyer demand could compel sellers to cut prices and offer concessions. However, how much home prices fall or rise will vary based on local market conditions.

Median Home Price in Chicago

The median home price in the Chicago metro area fell slightly year over year, from $290,000 in January 2022 to $285,000 in January 2023 – a 1.7% decrease, according to the U.S. News Housing Market Index, based on Redfin data.

Unlike other major cities that have limited space for new construction, Chicago has a vast inventory of existing housing stock. This means that there are more homes available for purchase or rent, which creates more competition among sellers and landlords, leading to lower prices.

However, in larger cities like Minneapolis and Chicago, rent prices are dropping (9% and 4%, respectively year-over-year as of December 2022). These drops can be partially attributed to greater housing supply due to local zoning laws and other policy changes.

Real estate has proven itself a worthy investment that provides cash flow and appreciation over time. Whether you're an aggressive or conservative investor, it's a great way to diversify your portfolio and can pay off in the short-term and long-term.

Each real estate office sets its own standards for top producers, but it's safe to say that a top producer would have to sell at least one home per month to qualify. Top producers earn around $112,610 a year to start, according to the BLS. 1 Mega-stars could earn $500,000 per year and up.

How much profit do most landlords make? ›

The amount will depend on your specific situation, but a good rule of thumb is to aim for at least 10% profit after all expenses and taxes. While 10% is a good target, you may be able to make more depending on the property and the rental market.

Some of the most successful entrepreneurs in the world have built their wealth through real estate. In fact, it's estimated that 90% of all millionaires invest in some form of real estate. There are several reasons for this, but in today's article, we'll share seven reasons why millionaires invest in real estate.

What Types of Commercial Properties Are the Most Profitable? High-Tenant Properties – Typically, properties with a high number of tenants will give the best return on investment. These properties include RVs, self-storage, apartment complexes, and office spaces.

Commercial real estate is known to yield higher returns than residential real estate. If you can afford to manage a commercial space, it can prove lucrative over time, depending on your area.

Commercial properties are considered one of the best types of real estate investments because of their potential for higher cash flow. If you decide to invest in a commercial property, you could enjoy these attractive benefits: Higher-income potential.

Despite higher interest rates making financing more expensive than usual, now may be the perfect time to invest in rental real estate because of all of its advantages and long-term potential for wealth generation. Don't let those rates scare you off — there are plenty of compelling reasons this could be a wise move.

According to real estate brokerage Redfin, the year-over-year median home price in Utah has declined 6.2%, 23% fewer homes have been sold and homes are on the market a median of 37 more days.

Real estate is a great asset to own when the economy is in freefall. A rental property typically acts as a natural hedge in a volatile market. Primarily because many people that sell their homes or properties during an economic downturn or recession need to sell their property.

Buying A House In The Fall

Outside of winter, a fall purchase can be ideal for cash-strapped home buyers. Once summer ends, sellers get more motivated. They usually lower their prices and provide an opportunity to get a deal. As is the case with winter, there's also less inventory during the fall.

Will home prices drop in a recession? ›

Will house prices go down in a recession? While the cost of financing a home typically increases when interest rates are on the rise, home prices themselves may actually decline. “Usually, during a recession or periods of higher interest rates, demand slows and values of homes come down,” says Miller.

“Such a decline is extremely unlikely in Utah” in 2023 and 2024, Wood wrote. Wood also said “2023 is not 2008,” when it comes to housing prices, noting “very few, desperate, unemployed homeowners face foreclosure ...

Why Are Home Prices So High in Utah? Utah boasts the nation's strongest pace of job growth, along with rock-bottom unemployment, ultra-low mortgage rates, few mortgage delinquencies, and low state and local taxes.

Housing prices in Utah are so far above historic trend lines, that three cities are currently among the 10 most overpriced markets in the country. That's based on a new analysis from Florida Atlantic University.

Therefore, investing in rental properties during rising interest rates can be profitable. Purchase rental properties at a lower price due to reduced demand for buying homes and rent them out to tenants at a higher rate. This can result in higher rental income and potentially higher property value over time.

Halfway through 2023, "The market has told us: no recession, no correction, no more rate hikes," Amanda Agati, chief investment officer for PNC Financial Services Asset Management Group, said in a report.

Real Estate Can Create Cash Flow

Another reason you may want to invest in real estate in a recession is to generate cash flow. Many assets don't pay out until you retire or sell them, but property allows you to collect rental income. This regular cash flow can give you some needed liquidity in a down market.