We are in the midst of a real estate boom, and prices have continued to ascend over the past year. In fact, the median price of single-family existing homes increased by double-digits in 78% of the 183 markets tracked by the National Association of Realtors over a few months.
As homebuying continues to grow in popularity, opportunities for real estate investing are also increasing—and many rely on a few key trends. Below, we break down what they are and how they may shape the investment landscape in 2022.
1. The Continuation of Historically Low Interest Rates
The Federal Reserve has kept short-term interest rates near zero since the onset of the pandemic but has been talking about bumping rates next year. While interest rates are expected to go higher, they are still likely to stay low by historical standards.
David Bianco, chief investment officer for the Americas at DWS Group, expects two quarter-point rate hikes next year. In addition, markets are not forecasting considerably higher interest rates. The 30-year Treasury bond is still yielding less than 2%, and 30-year fixed mortgage rates are just above 3%.
While the flurry of homebuying activity is expected to cool slightly in the year ahead, the continuation of the low interest rate environment may signal that the current boom will not end anytime soon.
2. The Emergence of Alternate Property Sectors
As the real estate market continues to expand, new opportunities are emerging for keen investors. Here are a couple of property sectors that could outperform in 2022:
- Single-family build-to-rent residential real estate: As the population shift away from cities continues, build-to-rent properties are growing in popularity. Research shows that single-family homes built to rent increased by 30% between 2019 and 2020.
- “Last-mile” industrial real estate: Growth in online shopping over the past two years has paved the way for more “last-mile” facilities such as warehouses. With e-commerce expected to continue on its present trajectory, these types of properties could prove quite lucrative in the years to come.
- Multi-asset real estate in the South East: Investments in multi-family communities have been steadily gaining popularity, especially as new regions of the country are providing increased opportunities, as demographic data in the 2020 Census showed. For those looking for broad diversification, these investments could offer the potential for solid returns.
3. The Sunbelt is Positioned for Further Appreciation
The Sunbelt, which includes cities in the southern third of the United States, is experiencing strong demand for real estate—and that is unlikely to change anytime soon. Here’s what’s driving higher Sunbelt real estate prices:
- Population growth: According to Census data, the Sunbelt is home to 10 of the 15 fastest-growing cities in the United States. The population growth in major southern cities is much higher than growth in the Northeast and Midwest.
- Business-friendly local governments: Real estate prices are highly correlated to the number of well-paid jobs that are available in the area. So, states that are attractive to employers are likely to see higher real estate prices. Sunbelt states like Tennessee, North Carolina, Texas, and Georgia are business-friendly, and have attracted thousands of employers.
- Milder climates: Real estate income is dependent not only on rent prices but also on maintenance expenses. All things being equal, colder climates result in higher maintenance expenses than warmer climates.
How to Make the Most of Real Estate Investment Opportunities
As highlighted by these trends, the real estate market has several opportunities for investors as we move into 2022. Yet there are very few platforms that give everyday investors access to a diversified portfolio of attractive properties.
Fundrise, America's largest direct-to-investor real estate investment platform, is one of those platforms. With a team of expert underwriters who rigorously and thoroughly vet investments, Fundrise identifies properties with a high likelihood of experiencing strong risk-adjusted returns.
What’s more, Fundrise’s history of strong and steady returns—even during times when public REITs experienced drawdowns—shows that the team has a unique ability to identify top-notch investments and help clients achieve the performance they seek. Fundrise also has accounts for every investor— whether you’re just starting with as little as $10 or you’re ready to invest $100,000s, they have an account for you.
As we head into 2022, there is a lot of uncertainty in the markets—with equity and cryptocurrency markets having the potential for massive corrections at any time. Through quality private market real estate investments, you gain access to an asset that has historically been a stabilizing influence on portfolio performance and position yourself for long-term growth.