Mortgage foreclosure filings have been declining for some time. In Q3 2019, foreclosures were down 6% from Q2 and 19% over the year. They’re significantly below pre-recession averages for the 12th quarter in a row.
Single-family housing starts are on the rise, jumping 9.3% between August and September. Permits for single-family properties were also up for the month.
The average mortgage payment has declined in recent months, actually falling 6.1% between June 2018 and June 2019. It also declined 3% in May — the first time mortgage payments slid in nearly three years.
Keep in mind that these are national trends and they may not speak to the exact market you’re looking to invest in. Make sure to study up on data specific to your region before making any investment decisions.
Housing Market Predictions for 2020
If you’re looking ahead to next year’s investments, a number of industry forecasts can help point you in the right direction.
Here’s what experts are predicting for 2020 as of mid-October 2019:
Low mortgage rates will continue.
Freddie Mac predicts 2020 will average a 3.8% interest rate on 30-year, fixed-rate loans. Fannie Mae predicts a 3.6%, while the Mortgage Bankers Association predicts a 3.9%.
Home sales will rise.
According to Fannie, Freddie, and MBA, home sales will rise compared to 2019, though at a slower pace than this year.
Home price growth might slow.
Home prices will rise no matter how you slice it, but the pace at which they’ll rise is up for debate. Freddie Mac’s forecast predicts home prices will grow 2.7% in 2020, dipping from this year’s 3.4% jump and 2018’s 4.9%. MBA predicts home price growth to slow to 2.2%, with the year finishing out at a $276,300 median price point for existing homes and a $327,300 price for new homes.
A forecast from property data firm CoreLogic (NYSE: CLGX) expects something different, predicting home prices will actually jump 5.8% in 2020.
Construction will jump, particularly in the single-family sector.
Both MBA and Fannie Mae predict single-family housing starts to jump in 2020. Fannie expects a 2.7% jump across the year.
Remember that these are just predictions and not any sort of guarantee. Real estate and economic conditions can change quickly, so it’s important to stay informed as your market evolves. You should also take into account any variables or risks in your own financial situation as you prepare to invest in real estate, as these will impact your investment options as well.
Timing the Market
No matter how much you know about the housing market, mortgage rates, or the Federal Reserve’s next move, there’s really no way to perfectly time a real estate purchase. Sure, we’d all like to snag a deal of a property with low interest rates and rising home values, but the fact of the matter is, it’s unpredictable.
Most experts agree that while being educated about real estate is critical, trying to time the market isn’t best. Though market factors are certainly important in a real estate purchase, your personal finances and the timing in your life matter more in the long term — especially if you want to stay afloat on your mortgage or ensure those investment returns.
The long and short of it? You want to buy a property when the timing is right for you, not for the market. Specifically, this means:
- You’re a good candidate for a mortgage loan or whatever financial product you intend to use for your purchase.
- You can afford your expected monthly mortgage payments and housing expenses (as well as those on other properties you own, too.)
- You have consistent income and employment. (In case you experience a long vacancy period or you can’t flip the house, you’ll need cash to cover your payments for the long haul).
- You have the time and means to care for the property, renovate it, and manage it (if you’ll be renting it out to others).
With that said, there are some statistically better times than others to buy a house. Research from Realtor.com shows that the first week of fall offers the best homebuying conditions of the year, with listing prices down 2.4% and buyer competition dipping 26.2% overall. (This varies, of course, by market.)
Mid-October, most of August, and early February also rank among the best weeks to buy, according to the analysis. Though you shouldn’t abide by these completely, they can help inform your overall purchase or investment strategy.
Best Real Estate Markets to Invest in
Since real estate is so local, the best places to invest in real depend on your overall strategy and goals. If you’re looking to snap up foreclosures, you might want to look to places like Delaware, New Jersey, and Maryland, where ATTOM Data reports foreclosure rates are currently the highest. Metro-wise, New Jersey’s Atlantic City and Trenton, as well as Rockford, Illinois, claim the highest foreclosure rates.
If you’re looking to fix and flip a property specifically, Realtor.com recently ranked the top 10 markets to do it in. These include:
- St. Louis, Missouri
- Birmingham, Alabama
- Miami, Florida
- Tampa, Florida
- Memphis, Tennessee
- Las Vegas, Nevada
- Phoenix, Arizona
- Orlando, Florida
- Columbus, Ohio
- Philadelphia, Pennsylvania
If you’ve got your eye on more up-and-coming markets, property management platform Buildium ranks Atlanta, Georgia, and Austin, Texas as your top options. Austin was also recently named the top city for real estate investment overall by the Urban Land Institute.
Real Estate Market FAQ
Where can I get information about my specific real estate market?
Your best bet is your local Realtors organization, the metro-level data at Realtor.com, or Zillow (NASDAQ: Z) (NASDAQ: ZG), which allows you to search individual cities and markets. You can also check with local real estate brokerages. Many offer market reports on either a monthly or quarterly basis. Sometimes, title companies also offer these sorts of resources.
If none of these options pans out, you can always reach out to a local real estate agent. They’ll be able to pull comps and fill you in on the latest market data. (Plus, it never hurts to have an agent on your side if you plan on numerous investments.)
What are the various ways I can invest in today’s real estate market?
Buying physical properties (and renting them out or fixing and flipping them) is just one of the many ways you can invest in real estate. You can also invest via REITs (real estate investment trusts) or via crowdfunded deals. If you’re interested in diversifying your portfolio with either of these strategies, check out our REIT and real estate crowdfunding advice now.
What are the best strategies for buying in a seller’s market?
In seller’s markets, the sellers have the upper hand, and they typically have their pick when it comes to buyers. If you’re planning to buy a property under these conditions, then you’ll need to put in the work to stand out. That often means: offering more money than other buyers, waiving contingencies, offering all cash, or including a personalized offer letter to sway the seller. Having a good agent on your side can also help here.
How can I determine what my estimated mortgage payment will be for a property I’m considering?
You can use an online mortgage calculator to give you an idea, though your best bet is to go ahead and get preapproved for your loan through a mortgage lender. This will give you a rough price range to work with, as well as inform you of your expected monthly payment, interest rate, and other details.
How can I reduce my risk when investing in real estate during a recession?
There are many ways you can reduce your risk and safeguard your real estate portfolio if a recession hits. Increasing your liquidity, diversifying your strategy, and branching out into safer arenas like multifamily and student housing can all be good options.
The Bottom Line
When it comes to the real estate market, there are a lot of moving pieces, and predicting what will come next can be pretty difficult. As an investor, the best thing you can do is be informed about your local market, reduce your risk by diversifying, and make sure you’re on solid financial footing before taking that next leap.