2022’s Most Important Real Estate Trends for Investors

At Rehab Financial Group, our specialty is short term financing for the real estate investment community. Our premier product is no down payment on 100% financing for the purchase, 100% financing for the rehab, up to 70% of the after repair value.

Welcome to our Market Analysis series. The goal of this series is to pull out all of the important and relevant news, trends and research to help you become a better real estate investor. Because today is the first edition of our series, Rehab Financial wanted to give you a broad overview of what we believe are the most important topics to cover in our housing market forecast for 2022. We’ll be covering the rising interest rates, the housing boom or bust, as well as the housing shortage and what impact the foreclosures will have on our industry.

Increase in Interest Rates

First up is the rising interest rates. What impact will it have? And also the housing boom or bust. So first rising rates. The Fed raised rates two weeks ago. We’ve seen rates rise almost every week for the past three weeks with the longer term products associated with our industry, the 30 year products, the DSCR product. Now we’re starting to see a trickle in effect of the short term products going to be forced to increase their rates as well.

Those rates should be rising for the next two years and the fact is, is that our industry needs to be prepared for it. It’s the first time we’ve seen rising rates for maybe once over the past 15 years. So we’re all in for a nice little ride with this, but what impact will it have on the housing market? Everybody’s been talking about this boom or bust. It is our opinion that we’re not talking about the same industry as it was in 2008 when you saw house values plummet. This is a much richer economy. The economy borrowing, what’s going on in Ukraine, gas prices increasing and the looming inflation. That’s what the rising rates are going for. The Fed is trying to control that.

So the fact is that people do have equity. They do have money and we definitely see that the economy is doing well enough that you’re only going to see small pockets of housing correction. In Pennsylvania, where we’re located, it’s probably going to be isolated to the beach areas where unsustainable growth is just going to be corrected. Maybe that’s five or 10% growth, but overall across the nation, we do not see housing being plummeted.

Housing Shortage

Second topic is the housing demand. Right now it’s estimated that we are short about four or five million houses from the demand. So there’s more demand out there for houses than houses available. Zillow reported that there’s only about a million houses available right now. So the shortage is just real. The fact is that from 2008, when all of the home builders started to really slow down their production, now production can’t keep up with the demand. Anywhere from windows, to roofing materials, to the houses themself. Even trim moldings around the house, you’re just not able to get your hands on it. So they’re not able to keep up with the demand anywhere closer.

So what does that mean for us and why is it getting worse? One theory that we have is because of the millennials. Millennials are really coming of age now where they’re really trying to buy houses and people haven’t moved for a really long time. That in combination with the shortage, you’re just not going to be able to keep up with it. The only good part of that is that with the COVID impact on things and the way that COVID played out, people are moving around a lot more. So being transient, being able move here, there work from anywhere is really helping people, but that’s also driving rentals as well.

Rentals are way up. Rental prices are way up. The cost to rent is even higher in a lot of areas than it is to buy. So for the investment community, the fact is that we look at it as we can be a solution or add to the possibilities of supplying rental properties, as well as fixing up old homes, to make them new homes for people to move into.

Home Foreclosures

Which leads me to the third topic, which is foreclosures. In 2008, 2009, ’10 foreclosures were skyrocketing. You had over a million. I think it was reported that over a million two in foreclosures were available during that period of time. Pre COVID 2018, 2019, you were looking at levels of four or 500,000 foreclosures per year. Because of COVID and all of the restrictions put in place, that dropped way down below 200,000 during 2020, 2021. Now the foreclosure moratoriums and forbearance agreements are all letting loose and the fact is that all of those properties that were in foreclosure, were starting the foreclosure proceedings during the beginning of COVID are now coming to fruition.

So we’ve already experienced in 2022, some serious increases. Even if that gets back to the normal levels pre COVID of four or 500,000, you could have a lot of properties going into foreclosure this year. Good and bad news with that is that it’s good news for the investors. The investors are going to be able to take advantage of a lot of availability of housing and a lot of people that are going to be reaching out to that housing to either fix and flip or fix to rent.

Your largest challenge at that point in time is going to wind up being keeping up with the conglomerates that are buying these properties in droves. Your best bet a lot of times is to utilize private lending resources, short term private lending resources to grab a hold of those properties fast, get the fix and flip done, or get the fixing done. So you can jump into a long term product later on. The key will be, is to grab a hold of those properties fast.

All three of these things together, the housing shortage and the rising rates that’s out there, are not really affecting the boom or bust of the housing, but the foreclosure availability the investment community providing housing solutions for those looking for homes. So we’re really bullish on this at this point in time and we think the investment market is ripe and ready to go. We’re hoping to be a great solution for you during this period of time.

From all of us at Rehab Financial, we hope you found this informative. We hope you found this insightful. We hope you’ll come back and join us again. And remember that if you do need any short term financing, we’re here and ready to go at Rehab Financial Group. Thank you very much. Happy investing.