It seems like history, but in 2020 and 2021 mortgage rates hit record lows in the US. At the same time, real estate investment surged. But the tried-and-true adage that real estate investing is a long-term proposition is truer than ever today, with mortgage rates steadily rising.With falling real estate prices and a looming recession, the question of whether now is a good time to invest in real estate is gaining attention.
Smart investors understand that real estate is a consistent hedge against inflation. Low interest rates a year ago made real estate affordable at first, but the real estate market has adjusted with rising house prices. And now, when interest rates rise above his 7%, many buyers find themselves discounted by the market.
This situation presents an opportunity for rental property investors who can raise rents as housing inventory dwindles and buyers whose prices are out of the market look for temporary housing until interest rates fall. increase. This model has the potential to provide investors with consistent passive income.
But it’s all about location, and rental property investors need to be aware of the economic realities of the area they’re buying from. , CEO of the University Credit Union of Los Angeles. “Obviously tenants want to hedge their bets that they can pay rent as much as possible,” he told Bankrate.com.
Price is an important factor in real estate investment. A lower purchase price can generate greater return potential, but that’s not the only factor to consider. Mortgage rates continue to have a significant impact on investment profitability, and with a recession looming, more rate hikes are likely.
Great returns in real estate tend to last through recessions, according to the report. latest report We have $88 billion in assets, of which $56 billion is real estate. The firm believes that the current market turmoil in the real estate market is likely to generate strong returns in 2023 and 2024.
“Listed real estate tends to lead private real estate in both sales and recovery during recessions,” Cohen & Steers said in its report. “Differences in real-time pricing between listed real estate investment trusts (REITs) and privately owned real estate can cause significant short-term disruption. Understanding leading and lagging movements in private and public markets. , property investors may be able to strategically allocate across the two asset classes at different times, trying to take advantage of how the market is priced in the current climate.”
As for continued inflation, the report also says sectors with short lease terms, such as self-storage and hotels, can quickly adjust rents to keep pace. These sectors are highly cyclical and act as buffers against inflation.
A Cohen & Steers report claims the US is headed for an “average recession” compared to the recession of the last 100 years. “Our base case scenario is a 2% to 3% decline in global real domestic production, over a period of about 12 months.”
But the report is particularly bullish about expectations of excellent real estate returns following these downturns. “Both real estate categories have the potential to deliver strong vintage returns as we weather this difficult period. I can do it.”
When it comes to alternative real estate investment opportunities, Cohen & Steers notes that technological innovations over the past few years have emerged as long-term winners in cell towers, healthcare facilities and data centers.
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