There is quite a bit of news that might convince you the sky is falling in the real estate investment space. Maybe that’s because extreme messages, such as gloom and doom, sell more papers (or eyeballs on the TV or browser screen).
If you’re an investor in one of our real estate projects, the news might worry you. So let’s take a look at some recent data.
Claim 1: Due to inflation, high mortgage rates, and a looming recession, fewer homes are selling. According to realtor dot com’s monthly housing market trends report, home inventory is growing with housing spending more time on the market and fewer homes listed. The number of homes actively for sale in October 2022 is 40.4% fewer than in the 2017-2019 (pre-pandemic) average. Meanwhile though, their active listing count is up 33.5% year to year.
Our conclusion: the market has tamped itself down, and is still strong. In the right geographic markets, and at the right price targets, the market for developers producing single family homes is sufficiently strong to enable profitable investment returns.
Claim 2: Month over month rent growth has declined in previously hot markets.
Our conclusion: of course, hot markets may calm down over time. New hot markets emerge. Importantly, year over year rent growth remains positive. People want to live somewhere: if not in a new home, then in an apartment. We anticipate the rental market — in focused geographic regions — to be extremely strong, both for traditional apartment developments as well as for build to rent single family developments.
Bottom line: it is just as easy to cherry pick positive news as it is to give in to the cascade of bad news. Investors who use a dedicated management group with a disciplined diversified portfolio, and realistic expectations on returns, should, in the long term, have little to worry about.
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