Real Estate Forecast 2020: What does it Mean for Real Estate Investing?
2020 is going to be an interesting year in our real estate forecast. Real estate investors need to take note of what is happening in the market so they can position themselves strategically in order to profit and grow their business.
Real estate investing is a dynamic business, which changes constantly and evolves. Surprisingly it is not tied only to the economy, but also to social perceptions and behaviors.
In general, 2020 will be the year where the markets are going to stabilize and adjust themselves in our real estate forecast. We had such a rapid growth and appreciation in the last few years.
Real Estate Forecast: What is happening in the housing market in 2020?
- Home prices across the country will stabilize and in some metropolitan areas the prices will actually fall (according to realtor.com, which holds one of the largest databases of housing statistics available:) Chicago, Dallas, Las Vegas, Miami, St. Louis, Detroit and San Francisco.
- Inventory will stay low. It could possibly hit the lowest level of available inventory in recorded history. Demand will continue to exceed supply.
- Mid-size price ranges (the “sweet spot” changes for every geographical area – see the blog I wrote on What is the sweet spot in real estate investing?) will be the most favored for home buyers and investors.
- More millennials are entering the market for buying homes, while Baby Boomers are holding on to their primary residence, instead of downsizing, and prefer buying a second home instead as an investment, due to the favorable economic conditions. Surveys show that millennials rank homeownership as one of their top goals in life—higher than even marrying or having kids.
- Demand for rental properties will remain strong, since a large part of the population cannot afford to buy homes due to the rapid home prices increases over the last few years, which exceeded increases in income and inflation.
- New technology and innovative platforms are entering the real estate industry making the concept of virtual real estate investing more mainstream.
What does this all mean to the real estate investor and what are the best real estate investing strategies for 2020?
Since demand exceeds supply of ready to move in homes, “fix and flip” is going to be the most lucrative strategy for 2020, especially in the mid-range, “sweet spot” values in any given geographical area.
Home buyers want properties that do not need any work prior to move in. In today’s fast paced world, there is no time or patience to deal with construction or rehabbing for the average home buyer. Where years ago, home buyers did not mind to buy properties at bargain prices and put in some “sweat equity,” nowadays that is not an incentive for most home buyers.
Wholesalers investors are highly needed to find those undervalued properties in need of repairs and flip them to rehabbers.
There is a lot of “cash” (meaning liquid funds) going around for real estate investing. Private investors with healthy saving accounts, IRAs and retirement accounts, prefer getting into real estate instead of buying stocks. Hence the prolific formation of institutional private lenders organizations, and REITs, which offer appealing interest rates for investors or offer to enter into partnerships.
The rental market (buy and hold) will continue to stay strong, especially for the properties in the “affordable” rent range. The population which cannot afford to buy a home will still look for rentals as their only option. Rapid house prices increases over the last few years have surpassed income increases and inflation, leaving a lot of people out of the home buying race.
Choosing the right strategy depends on where you are as an investor, as far as experience and finances. If you are new to real estate, with very little to no financial backing, wholesaling is probably your best option. You can graduate very quickly to fix and flip and/or buy and hold, since there is plenty of private funding available, but you do need some basic experience as an investor in order to borrow and establish credibility and trust.
The bottom line. The real estate market in 2020 is still going strong.
Would you like to take part of the real estate investing boom and make 2020 your best year yet?