With the first few weeks of Q4 in the books, now is an opportune moment for savvy real estate investors to gameplan for the remainder of the year and set yourself up for success in 2023.
As interest rates continue to trend upward and housing demand still dramatically outweighing existing inventory levels in the majority of major metropolitan markets, the single-family residential housing sector has prompted a number of investors to rethink their strategy in order to maintain profitability in this dynamic environment.
Some investors have decided to ditch fix-and-flip projects and transition to long-term rental property assets while others are holding off on acquiring properties as they adopt a ‘wait-and-see’ approach to gauge market behavior for the remainder of the year with the hope that it stabilizes heading into 2023.
The financial experts at Express Capital Financing are data-driven professionals with a proven track record of facilitating successful and sustainable real estate investments for decades—regardless of external market factors. To that end, we have crunched the numbers to assist you in making more informed investing decisions so that you can grow and scale your business with confidence. Here is a quick breakdown of the current state of affairs of the real estate market and how you can fine-tune your strategy to optimize returns and achieve your goals.
Based on statistics compiled by the National Association of Realtors (NAR), the average home sales price rose on a monthly basis throughout 2022, hitting an all-time peak of $413,800 in June before dropping to $403,800 in less than a month. These elevated expenses have driven down the overall number of mortgage loan applications, which have hit a historic two-decade low.
Considering home sales have fallen on average 6% monthly and approximately 20% over 2022, it is no surprise that everyone in the real estate industry is feeling the consequences of elevated interest rates. On the bright side, even with this dramatic pullback in transactional activity, aggregate price growth would have to decrease for another half-year to drop annual appreciation under 5%, which would be in alignment with historic medians.
Although the downward trend should be noted, investors should remain optimistic that there are still viable opportunities in the current marketplace. The overall housing market is by no means back to “normal” in the post-pandemic era. While prices have decreased recently, the national average home value is still 44.5% higher than it was in July 2019. The rising interest rates have dissuaded some buyers from entering the market, but those that have chosen to remain active face considerably less competition, giving real estate investors the opportunity to search and acquire a wider variety of properties without having to get into bidding wars.
As mortgage rates continue to dissuade potential homebuyers from entering the market, the single-family rental market is proving to be a viable hedge for investors looking to shift their portfolios to adapt. The average monthly rent for single family units has jumped almost 60% over the past year, yet demand has continued to increase as well. This has prompted many real estate investors to convert their fix-and-flip projects to long-term rental properties—allowing them to enhance their cash flow and take advantage of asset appreciation.
A Trusted Lending Partner
Leveraging tools and data to facilitate informed decision making is becoming increasingly necessary in today’s dynamic real estate investment marketplace. And when you identify a promising deal, you want to have the ability to close the transaction quickly without having to worry about any delays associated with financing. That is exactly what you will get when you choose to work with Express Capital Financing. Our experienced team of professionals specialize in developing innovative and effective funding solutions for a wide range of investment projects—all in a fraction of the time and paperwork it takes conventional banks.