For investors who are interested in residential real estate, the recent markets have proven to be a solid investment. For many, investing in real estate can be an income game-changer, but getting the timing right couldn’t be more important. How has 2019 treated the real estate market and is now a good time to invest in property? Well, 2018 was a great year for the housing market, with some areas of the country seeing home prices increases of more than 10%.
There are many factors associated with an investment’s success., We look at what’s in store for the real estate market the rest of 2019:
Property Prices
When compared to prior years’ prices, 2019 is set to see continued growth. The total amount of households in the US has increased by as much as 13.5 percent over the last 14 years. When it comes to real estate pricing in 2019, however, affordability has been a key issue for new investors. Housing valuations have increased between 5 and 10% in the last year, raising the cost of acquisition significantly. A group of researchers at realtor.com expect these figures to potentially rise by another 3% before 2020, an increase from the previous forecast of only 2.2%. Overall, more than 20 major U.S cities have shown increases in home pricing over the past six months.
These boosted numbers are motivating many to rent rather than purchase.
Rental Potential
Demand for rental properties, both single-family and apartments, will see increased demand throughout the rest of 2019 and beyond. However, this demand falls within certain and specific limitations – with property prices and cost of living increases, there is greater demand for lower to mid range-priced rental properties. Investors would do well to consider that younger generations are graduating college at a rapid rate and looking to move into their first homes. Due to high costs, this generation is much more likely to rent than buy – good news for those currently investing into long-term rentals!
A good rule of thumb when considering a rental property is not to consider homes where the rentals are equivalent to 25% or more above the average in the area, as this is a surefire way to be stuck with an unrented home for longer than you can afford. Rentals in central or particularly sought-after locations are an especially limited commodity, likely to appreciate greatly in price during the next 6 months. Look for areas where job growth is high, this is likely where the younger generation will move to seek employment opportunities. Recent research has also shown that the rate of rentals have increased by as much as 92% in certain cities.
Investing in Real Estate
Now more than ever it is possible to invest in real estate without being a landlord or having to manage the property yourself. Real estate tokenization, exchange traded funds (also known as ETFs) real estate investment trusts and other options are either currently available to investors or gaining traction. ETFs, for example, are a collection of stocks or bonds in a single fund, but investors can also turn to the more typical mutual funds for real estate.
There is also the Real Estate Investment Trust (REIT), the more traditional version of public or private real estate investment vehicles. In addition,“eREITS” have recently been introduced through crowdfunding sites under Reg A., offering options that allow the investor to benefit from the real estate asset class without actually owning or having to manage it. Just as demand is growing for rental properties, it is also growing for technology and new developments in real estate.
The outlook for real estate in 2019 remains positive compared to prior years, and we are set to see the allocation of even more capital to real estate and real estate-related investments over the coming months. Multiple real estate investment vehicles such as tokenized offerings, ETFs or real estate investment trusts are popular due to efficiency and easy management of properties. Interest rates in the housing market may still see an increase, but long term stability will be the top benefit of 2019.
That said, rental real estate may be one of the best overall performers of the year.