This morning, I had a meeting with a local stager who happens to live in my neighborhood. We were talking about real estate in 2022, where the market is headed, interest rates, and so on…
So, what’s in store for real estate in 2022? What the future holds really depends on your personal situation!
Feel free to skim down to the highlighted section that fits your personal situation!
CONSIDERING SELLING YOUR HOUSE?
- If you currently own a home, and are willing and able to sell, then now is a great time to do so! We are at historic highs and there may be tax benefits (that may change in the future) and as the saying goes, “a bird in the hand is better than 2 in the bush.”
- If you own your home, but selling right now doesn’t make sense for any number of reasons (kids in school, not interested in leaving your neighborhood and can’t find anything that makes more sense, etc.), then you may consider refinancing your current home and cashing in on some of the equity at these low rates. Then, you can turn around and leverage that into an investment property. (Or invest in other income-producing assets).TIP: Get an idea of rental rates in your area and make sure that your refinance payment is below the rental rate so you can move in the future and hold on to the home as an asset if you should choose to do so.
ARE YOU PLANNING TO BUY A HOME IN 2022?
- If you’re looking to buy your primary residence, but are worried the market is going to crash or are tired of battling it out. While nobody can predict the future, all expectations are that Austin is going to continue to grow and values to appreciate. So I don’t expect a dip in pricing, but I DO expect an increase in interest rates. We’re already up nearly half a point from historic lows. Every percentage point that your interest rate rises costs you more money each and every month and reduces borrowing power.PLUS, the national growth over the past year was ~ 20% year over year. Predictions are this will slow to about 8% (Historical averages are around 4%). In Austin, we saw an increase of over 24% with some pockets double and close to triple that!
All that to say, prices are NOT likely going to drop anytime soon.
- If you’re looking to buy an investment property (whether it’s for immediate cash flow or for future appreciation), the same applies to you as the above, except there are some other considerations with regard to types of properties you’re looking at and looking at the numbers. The “values” vary a bit when you’re looking for cash flow and it comes down to what kind of return you’re looking for.For instance, if you want a vacation rental that you can rent out for cash flow and use occasionally as a getaway, then you’ll want to look at it from a business standpoint.
If you’re wanting a residential rental unit, then you want to look at areas that are up and coming and that you can still buy homes that can properly cashflow with taxes, insurance, and other expenses.
- If you’re looking for a vacation home on the lake, then you’re going to need to look at spending a bit more or buying something that needs a total renovation or a tear down to build! There are very few “deals” on the water these days! We actually do a good bit of direct mail marketing for off-market deals and even those options have slowed down for us substantially, but they’re still out there and we’re sending a couple per month to our approved investor list!We do still have some strategies to find off-market deals and homes with equity AND options to update/renovate to have built-in equity. The last two homes that I’ve closed with clients have had 10% and 14% equity at appraisal, but both needed some updating and renovations, which will likely double that.
A client that bought in May of 2020 for $485K did a medium-sized renovation to the tune of about $55,000. When he refinanced, it appraised for $865,000 (~ 16 months later). But this isn’t for the faint of heart and not everyone wants to tackle these kinds of projects.
- If you’re a few years out, but want to see what’s out there. Values are expected to rise. PERIOD. This may be a great opportunity for you to buy a home now, rent it out and realize the benefits of owning real estate (cash flow, tax deductions, write-offs, and more).
The bottom line… For real estate in 2022, everyone’s scenario is different. If you’re looking to buy your first home in the next year, move to a new home/area, or start investing in 2022, let’s connect and design a proper strategy for you and your situation!
