Is Housing still a Good Investment for your cash π π
Investors have been getting killed in what is seen as the "Safest" investment classπ²π π
As an investor, the current housing market is an interesting and complex landscape to navigate. There are many factors at play that affect the market and influence investment decisions. In this write-up, we will explore some of the key trends and considerations that investors should be aware of when assessing the housing market.
One of the most significant factors impacting the housing market right now is the imbalance between supply and demand. The COVID-19 pandemic has caused a surge in demand for housing as people seek more space and stability in their living arrangements. Most workers are still not back in the office nearly as often as they were before the pandemic. Various sources suggest that less than half of workers actuallyΒ go into an office on a given day, at least in major markets. This has led some leading tech firms and investment banks, for example, to issue ultimatums for a return to the office.
As employers and their workers settle on their work preferences, many firms will continue to hold onto their offices either as a precaution in case they need the space in the future or because they could not break their lease. However, more firms are downsizing or not renewing their expiring leases. As a result, vacancy rates are still rising slowly, in contrast to every other major property sector. Many tenants have even started subletting their office space until their leases expire.
Another important consideration for investors in the housing market is interest rates. Historically low interest rates have helped to drive up demand for housing as more people can afford to take out mortgages. However, as interest rates rise, it could become more difficult for some buyers to secure financing, potentially cooling demand.
For investors, rising interest rates could also impact their ability to obtain financing for new purchases, increasing the cost of borrowing and potentially reducing returns on investment. As such, it's important for investors to stay up-to-date on interest rate trends and be prepared to adjust their strategies accordingly.
Aspects of the industry are normalizing (i.e., reverting closer to their pre-COVID patterns), while others appear to have sustained permanent shifts to a βnew normalβ, following the pandemic-induced changes in how and where we use different types of properties.
Quality of life and affordability play a big role in where people choose to live, and many of the markets that received relatively lower scores this year have inadequate infrastructure for their population size and growth. Raleigh, Phoenix and Charlotte fell in rankings this year but still remain in the top 10. Reflecting slower coastal growth, Seattle exited our top 10 list, but Miami climbed up to secure the number seven ranking.
The current housing market presents both opportunities and challenges for investors. With high demand and limited supply, rental properties could offer strong returns in the short term. However, rising interest rates and the potential for a cooling housing market in the future should also be considered. Ultimately, the key to success in the housing market is a careful assessment of the many factors at play, along with a well-informed and adaptable investment strategy.