After a record-breaking run that saw mortgage rates plunge to all-time lows and home prices soar to new highs, the U.S. housing market is now slowing down. Home sales have been declining for 11 consecutive months and home values have seemingly peaked. Home prices are just now beginning to slowly decline [1], and economists predict they will continue to drop in 2023 [2].
Right now, mortgage availability is still limited and new home construction has fallen again, but home prices remain high year-over-year and are not as eye-popping as they were in early 2022 [3]. Despite the slowdown, the correction is likely to be a modest one, with no major crash expected.
References:
[1] Housing Market Predictions For 2023: Will Home Prices Drop? [2] Is The Housing Market About To Crash? | Bankrate [3] Housing Market News – CNBCProperty Transactions Drop by 30.5%
Pending home sales have been dropping for the last six months [1], with a significant decrease of 30.5% in the third quarter of this year according to Redfin [3]. This could be due to a variety of factors, such as higher mortgage rates, a decrease in affordable homes, and the decrease in demand due to the pandemic.
These combined issues are leading to a predicted 14.1% decrease in property transactions compared to last year, according to Tryq [2]. This would be the lowest number of property transactions since 2012.
References:
[1] Real Estate Trends: Pending Homes Sales Have Declined For … [2] Home sales could plunge in 2023. These cities … – CBS News [3] Investor home purchases drop 30% as price gains slow – CNBCWhat are Pending Home Sales?
Pending home sales are a leading indicator of housing activity and are based on signed real estate contracts [1]. It is when a seller has accepted an offer from a hopeful buyer, and the deal is in the final stages of escrow before closing [2].
This is different from a contingent sale, which means that the buyer’s offer is conditional on certain terms being met [3]. Generally, pending sales can be a sign of a healthy housing market, as it indicates that there are buyers willing to purchase homes.
References:
[1] Pending Home Sales – National Association of REALTORS® [2] What Does Pending Mean In Real Estate? Pending Sale FAQs [3] What Does Sale Pending Mean? Don’t Give Up … – Realtor.comShould you invest in REITs or Real Estate?
Real estate has long been a popular investment for those looking to diversify their portfolio, but in recent years, real estate investment trusts (REITs) have become an increasingly popular alternative. REITs are publicly-traded entities that own, operate, and finance income-producing properties, and they provide investors with the opportunity to invest in large-scale real estate projects with little capital outlay.
REITs offer investors a number of advantages when compared to direct real estate investments. Most notably, REITs allow investors the opportunity to diversify their portfolios and gain exposure to several different types of real estate investments, including residential and commercial properties, without the need for expensive operating costs, such as property taxes, insurance, and maintenance. Additionally, REITs provide investors with a steady stream of income as many have fixed dividend payments.
For those looking to diversify their portfolios and add a stable real estate component, REITs are a viable alternative to direct real estate investments. REITs are easy to purchase and can be bought and sold on most major stock exchanges, and investors can gain immediate access to a wide range of investments at a lower cost than they could by investing in individual properties. Additionally, REITs provide access to a wide range of real estate investments, allowing investors to diversify their portfolios and mitigate their risk.
As with any investment, however, there are some risks associated with investing in REITs. REITs are a securities investment and are subject to all the risks inherent with any other securities. Additionally, many REITs are heavily dependent on the health of the overall economy, and an economic downturn could significantly affect their performance.
Overall, REITs provide a great opportunity for those looking to diversify their portfolios and gain exposure to real estate investments without having to manage a portfolio of individual properties. By providing investors with access to a wide range of real estate investments, REITs allow investors to diversify their portfolios and mitigate their risk. With the right research and due diligence, REITs can provide a great investment opportunity.
FAQs about REITs investment
REITs, or Real Estate Investment Trusts, are a type of security that invests in real estate and mortgages. They provide investors with the opportunity to own a diversified portfolio of real estate assets without having to purchase the individual properties themselves. REITs have become increasingly popular over the past few years due to their potential for high yields and low volatility.
Below are some frequently asked questions about REITs investment:
The main benefits of investing in REITs include the potential for higher yields, diversification benefits, and liquidity. REITs provide investors with access to a variety of real estate assets from all over the world, which helps reduce risk. Additionally, REITs are often less volatile than other investments and can provide steady, consistent returns.
Although REITs can provide higher yields and diversification benefits, they also carry certain risks. The most common risks include market volatility, tenant risk, and interest rate risk. Market volatility can cause prices to fluctuate, while tenant risk is associated with tenants being unable to pay rent or vacating the property. Interest rate risk can also affect REITs as they can be sensitive to changes in interest rates.
There are several different types of REITs available, including residential REITs, commercial REITs, and industrial REITs. Residential REITs invest in residential properties such as apartments and single-family homes, while commercial REITs invest in office buildings.
Some of the best REITs to consider investing in include American Tower Corporation (AMT), Simon Property Group (SPG), Public Storage (PSA), Equity Residential (EQR), Prologis (PLD) and Host Hotels & Resorts (HST). American Tower Corporation (AMT) is one of the largest REITs in the world and provides services related to wireless communications. It offers a high-yield dividend of 2.2%. Simon Property Group (SPG) is a diversified retail REIT that owns shopping centers, malls and outlet stores. This REIT has a long history of increasing its dividend payment and offers a current yield of 5.3%. Public Storage (PSA) is one of the largest operators of self-storage facilities in the United States. It has a long track record of dividend increases and offers a current yield of 3.1%. Equity Residential (EQR) is a residential REIT that owns and operates apartment buildings in major cities throughout the United States. It has a yield of 3.5%. Prologis (PLD) is a global leader in industrial real estate and provides services related to logistics. It has a current yield of 2.6%.
