Rising Interest Rates - Is now still a good time to buy?

In the real estate industry, banks and lenders compete for facilitating the buyer, which pushes up or down median monthly interest rates on residential mortgages. These lenders can either be government-backed or privatized.

Interest rates are the costs associated with borrowing money which typically is a percentage of the principal (amount loaned) charged over time.

The median interest rate on 30-year fixed real estate mortgages has stayed at historically low levels from 2013 to 2021, thanks to economical house prices, strict lending criteria, and a shrinking surplus of unsold houses. However, it has begun to climb in 2022, but still, it is at historic lows.

Increasing interest rates affect many elements of the home purchase, therefore it's critical for real estate investors to understand them.

Market Trends For Single-Family Rentals

The single-family rental prices continue to rise and many industry experts don’t think we’ll be seeing a slowdown. A huge majority of people are shifting towards single-family rentals instead of owning a home, and this shift is keeping both the prices and rents of single-family homes high.

According to theUS News, In the last quarter of 2021, construction began on 16,000 single-family houses that would be rented out. As per the National Association of Home Builders' analysis of U.S Census statistics, this is the highest quarterly number of housing construction for build-to-rent homes since 1990.

Those houses that contractors expect to keep and rent out are included in the trade association's report. Houses being constructed for sale to real estate investment firms or buyers who want to rent the residences are not included.

Although only 5.4 percent of all single-family housing constructions in the third quarter were for rental, construction companies are investing heavily in the build-for-rent concept.

Some companies are already planning to construct more rental homes for investors or investment firms looking to profit while potential home buyers continue to fail to find affordable homes.

Is Real Estate Investment Still Profitable?

Despite all the problems and rising interest rates, here is why investing in real estate is still a good idea:

Return On Investment

Many people start their investing journey by making investments in stocks and crypto before transitioning into investing in real estate due to its’ higher barrier to entry. Doorvest simplifies and makes investing in real estate simple. On the other hand, investment homes may yield more benefits, but rental homes and properties are more suitable for passive income. The overall median income for rental owners jumped almost 7.7% in 2021. Furthermore, this figure could be substantially higher based on the area.

There was a lot of uncertainty during the pandemic with a variety of investment vehicles, however, the real estate market kept its cool even during the peak pandemic days. Furthermore, It also has the benefit of being a movable asset, as opposed to stocks.

A nicely-picked rental home may be a better alternative than expanding your stocks if you're searching for a solid return on that investment.

Ability To Make Equity

Consider purchasing a rental home rather than a personal house. Somebody else can assist in paying off your mortgage and interests for as long as they stay in your house, and you'll eventually begin creating equity on your home.

You can also make some profit if you rent out your home at a higher price than your total mortgage interests. This increased income stream can be used to pay off debt, utilities, rent, or save until you have to pay your next home's deposit.

Keeps You Safe From Inflation

Overall, the market has witnessed hyperinflation and a decrease in purchasing power during the last year. While these shifts may harm other investment markets, real estate is more immune to inflation.

Inflation will often be favorable for house owners. Inflation tends to raise rents and housing costs. This indicates that if inflation goes up, you may increase the rent on your investment home.

Your main and interest mortgage payments will stay the same as a fixed-rate mortgage. This might result in a higher profit margin without having a big investment in the house.

Time in the Market Over Timing the Market

The real estate market is pretty different from other investment markets. Here, you can’t time the market. No matter when you invest in real estate, it is always a good time, so long as you have the means to invest.

Don’t let timing the market be the culprit for never investing or getting started.

Rates Are Still Historically Low

If you take a look at the market trends of the last 10 years, you will find out that there is rarely any fall in the market prices. According toForbes, housing prices are expected to go up by 16.3% till December of this year. Moreover, home prices are still expected to rise and appreciate through the end of this year given the limited supply of home inventory.

This scenario indicates that the rates are technically still historically low. If you will delay the investment, you will have to pay more for the same home which was way cheaper just a year ago.

There Is A Shortage Of Homes

According toFortune, many real estate experts and agents claim that there is a record shortage of homes for sale in 2022. This shortage is causing mortgage interest rates and home prices to rise. Moreover, gurus are also predicting that this shortage will take years to rectify and the price increase trend will continue.

Therefore, now is the right time to invest in real estate and have your share of the profit from this massive industry.

Rental Increases Overtime

As the COVID-19 pandemic is weakening, there is a huge surge in rents. According to CNBC,many homeowners have made an almost 40% increment in their rent post-pandemic. Moreover, rentcafe says that since 2010, the average rent in the US has increased by 36%. Multiple factors including increased taxation, expensive land, and inflation have fueled this increment in the rents.