Housing Market Update From Real Estate Professionals

Investors looking to further their success in the real estate industry are always keen to hear advice and insights from some of the most astute experts in the business. Recently, our CEO Jeffrey Tesch and Executive Director Tim Herriage had the opportunity to sit down with Rick Sharga of Ten-X - a successful real estate investor, executive and entrepreneur - to discuss topics ranging from current market trends impacting investors to tips for succeeding as an investor. The conversation yielded helpful advice that investors can use today so they can keep growing their portfolio tomorrow.

·According to recent data, foreclosures are at about 50% of pre-pandemic levels, and will not return to those levels until 2023.

·However, 93% of borrowers in foreclosure today have positive equity in their homes, meaning that they are more likely to be able to sell their house at a profit than during the Great Recession.

·The lack of inventory for bank-owned homes means that investors need to look upstream for properties in the early stages of foreclosure.

·New York and Florida have high percentages of foreclosures due to long foreclosure cycles; however, this does not mean there is an overabundance

·In the last year before interest rates went up, housing starts were at 1.2 to 1.5 million annually - which was making a dent in the inventory shortage.

·There is currently a backlog of homes that were started, but not finished due to Covid-19 (supply chain disruptions, labor shortages). These homes are taking longer to build and hitting the market much later than usual - but they're selling quickly because they've been marketed for so long.

·Cancellation rates on contracts are high right now (20-30%) due to higher interest rates - this is causing builders to make less expensive homes.

·Different markets will be affected by price corrections differently - some may even continue to see prices rise

·Rates have offset the rises and made it affordable for people to buy homes.

·Wages are still going up about five percent a year.

·According to Freddie Mac, rates have doubled in a year, which is unprecedented.

·The hope for 2023 is that inflation numbers will be moving in the right direction so that the FED can stop being aggressive and interest rates can plateau or even decrease slightly.

·If rates stabilize, home price appreciation will already have slowed down significantly, and affordability will start to improve next year.

The current inventory shortage of bank-owned homes means that investors need to look upstream for properties in the early stages of foreclosure. In the last year before interest rates went up, housing starts were at 1.2 to 1.5 million annually - which was making a dent in the inventory shortage.There is currently a backlog of homes that were started, but not finished due to Covid-19 (supply chain disruptions, labor shortages). These homes are taking longer to build and hitting the market much later than usual - but they're selling quickly because they've been marketed for so long. Cancellation rates on contracts are high right now (20-30%) due to higher interest rates - this is causing builders to make less expensive homes. Different markets will be affected by price corrections differently - some will experience more drastic measures than others. If you're considering investing in real estate, it's important to partner with a lending institution like RCN Capital who can help you navigate these changes and find the best investment opportunities out there.