Real estate investing and development have been the top wealth builders in the United States for decades. By using the right tips and implementing effective strategies you can increase your monthly cash flow, diversify your real estate portfolio, and reach financial goals.
The economy is slowing and trade wars have majorly affected specific localities. When making any real estate development decisions this year it is imperative to remember a few tips and equally important to understand the trends that will be affecting the market this year.
Larger Concentration of Demand
The concentration of demand is shifting because as many new jobs are created there is also a new demand for housing. More and more businesses need support services and oftentimes these businesses tend to cluster into markets where the services already exist. Since the same type of businesses are so concentrated, and that concentration is also where a majority of the population lives the demand for housing in big markets will continue to grow. Something that developers should keep in mind is that as the demand grows rapidly builders will create more supply and prices will go up along with rents.
Home Prices Slowing
In the United States, home prices were up by five percent last year. The demand for housing in big markets is strong and prices of single-family homes have peaked in places like San Francisco and Seattle. However, in other markets, the demand has slowed significantly. This is common when the prices of houses surpass local incomes. Eventually, things will slow and stop, allowing income time to catch up.
The current market calls for different strategies depending on the type of real estate investment. If someone wants to cash in property and exit the market then this is a perfect time. However, if someone is considering investing in one of the boom markets then they would be buying at the peak. As of right now, single-family homes and apartments are a safer investment in those boom markets.
While boom markets that peak often ends in a bust, as long as the local economy continues to operate smoothly prices there is the possibility that they could go sideways for a few years.
Gap Increases between Renting and Owning
Due to the surge in home prices recently in the big markets, many people cannot afford a single-family home. While cities such as New York and San Francisco always had a high ratio of prices to rent the same now applies to smaller cities such as Austin, Denver, and Portland.
For investors in rental properties, this comes as good news, however, there is a smaller number of people able to afford the high rent prices. Although it can take time and money it would be a good strategy in these markets to split single-family homes into multiple rental units.