The real estate market has been absolutely booming for the past year. Property values are at all-time highs, demand is through the roof, and it’s becoming harder and harder to find a home nowadays.
If you’re a seller, you’re probably ecstatic about the current times. As a buyer or renter though, you may be less than thrilled.
There are an excruciating amount of variables that go into every real estate transaction, no matter what side of the deal you’re on. Not only do you need to educate yourself on the individual markets within your area, you also have to pay attention to macroeconomics!
To get a head start on the action, you’ll need to gain a firm understanding of how the market functions today. Keep reading below to learn about what buying, selling, and renting a home looks like in 2022!
Buying a Home
Housing inventory is extremely tight right now. The number of sales on the market is at record lows, making it difficult for buyers to find homes. If you’re looking to buy a home this year, be prepared for a highly competitive market.
When searching for properties, always check the actual selling prices, not just the listing prices. Some homes receive exorbitant cash offers, which is something you’ll want to know before pursuing a property.
With how competitive this market is, it is wise to look for homes that are slightly lower than what you’re willing to pay. This way, you are able to bid above your budget, in the event that other buyers top your offer. Just make sure to set a limit to how much you’re willing to offer.
You will probably be outbid several times before you finally find yourself as the top bidder of a home. Buying a home can be a frustrating process. Do not be discouraged!
In this market, it is perfectly normal to take several months or more to buy a home. Take some comfort in the fact that tons of homebuyers are experiencing the same exact problem as you.
If you plan on renting out your property, you can use a service that provides credit checks for landlords. Nowadays, you can gain access to real-time data regarding your tenants’ credit reports.
If you’re interested in making passive income without buying an entire property, you can try investing in vacation rental properties. With as little as $100, you can invest in high-yield vacation real estate!
Selling a Home
As alluded to above, it is a tough time to be a buyer right now in the housing market. On the flip side, it is a phenomenal time to be a seller.
In this competitive environment, houses are often going for tens of thousands of dollars over their asking price. Moreover, they’re selling like hotcakes!
If you plan on selling a home this year, make sure you have another place to stay. It is very likely that your home will sell quickly. You don’t want to be crashing at a hotel once you give up the rights to your property.
To sell your home as efficiently as possible, use an online property listing service. Today, there are a variety of different services that list your home for you and guide you through the home selling process.
Renting a Home
Similar to buying a home, it is getting increasingly difficult to find quality rental spaces for an affordable price. With prices of properties rising, you can expect rent prices to rise as well.
There is high demand for rental spaces right now. Though it may not be as difficult as finding a home to buy, you might have to search for a few weeks or even months before finding a space that suits your needs.
When searching for a place to rent, use all the different platforms available: Trulia, Zillow, apartments.com, rent.com, Facebook Marketplace, and more. You never know what properties might appear on one platform, but not on another. To maximize your chances of finding a place, look through as many sites as you can.
If you’re seriously struggling finding a place to rent, you should consider moving in with a roommate or two. Studios and one-bedroom apartments are becoming harder and harder to come by.
Living with some roommates can significantly reduce your monthly rent cost. In some cases, it can even cut your monthly living expenses in half!
How COVID-19 Changed Everything
The housing market was already seeing high demand and low supply, before the COVID-19 pandemic. Now, with the arrival of the pandemic, these issues have been exacerbated.
Tons of renters joined the housing market in search of a home for themselves. However, many homeowners looked to trade up and increase their space. As the demand shot up, a lot of these homeowners decided to stay put, therefore limiting the supply of properties for sale.
During the COVID-19 pandemic, the country saw mortgage rates at a historic low. At the start of the pandemic, the federal government had suspended all loan payments and set interest rates to 0%, in an attempt to protect the economy.
The economy has survived since then. In fact, it has thrived; a lot of people even think it has thrived too much. Fears of a potential bubble have been discussed for quite some time now, and some have suggested that 2022 could see an event similar to the 2008 housing crisis.
The Effects of Inflation
Typically, inflation is a positive development for property owners. When prices of goods go up, the value of your assets goes up.
Furthermore, when supply is low and demand is high like right now, sellers can ask for exorbitant prices for their homes. In many cases, they can even receive offers above these high prices.
In recent months though, the federal government has stated their intentions of increasing rates, in an effort to curb inflation. The effect of these increases will be dependent on how rapid they are. The market waits to see how the government will handle inflation.
If you are invested in a home as a leveraged asset, you will pay the same fixed rate, regardless of the property’s change in value. In this current inflationary market, we have yet to see financing rates coincide with inflation. As a result, your return on investment is maximized.
If you are a prospective investor looking to flip a home, your circumstances are vastly different from existing owners. Mainly, you don’t have the advantage of time on your side. You’re looking to make a quick buck and probably throw your earnings into another investment.
With this mindset, it is possible to accumulate cash quickly. However, it is also possible to lose cash quickly; especially in an inflationary market.
If you get caught in a real estate bubble, your assets can lose a huge percentage of their total value in a very short period of time. This is one of the biggest risks of short-term investing.
This is why you should always make sure you have enough equity to absorb any potential losses. Do not ever go all in on a property. Remember that there is a risk to every investment, even in real estate.