The latest data shows that a new record high number of home sellers are pulling their listings off the market.
What will it mean for the state and direction of the real estate market? What are the best investment strategies in this phase of the cycle?
24% Of Home Sellers Delist Their Properties
New data from Redfin and coverage by the NY Post shows that 2% of home listings have been pulled down each week over the past 12 weeks. A new record high.
Redfin has credited this to sellers not receiving the offers they hoped for, or not being able to find any buyers at all.
While this could be part of a larger trend and cycle, this is also quite common in the fall. Most buyers moved during the summer, before school started. Less buyer activity means fewer offers, and reduced listing prices during this season.
It is also noted that the costs of taking out a long-term mortgage are now up 40% over the past year. Which is going to make it much harder for any willing buyers to get financed. Which is compounded further by extreme inflation which has driven up other living costs by 30% or more.
The Effect on the Market
Fewer listings can help support prices as it balances the dynamics of supply and demand.
Some experts have predicted a 20% drop in prices in the near future. Though we still have a way to go before striking a balanced market in terms of days on market, and a normal healthy market.
There may be fewer retail buyers out there. At least those that require mortgage financing. Yet, ongoing domestic migration means many buyers with large amounts of equity are able to afford more home in less expensive areas.
Investment Strategies in This Market
It’s going to be tougher for amateur house flippers who face higher costs, and less bullish demand. Yet, real estate investment remains one of the best and most essential elements of a smart portfolio in this market. Fortunately, there are alternative strategies to rely on.
Income Property Investing
Temporary fluctuations in paper valuations make no difference to the cash income and yields income properties can produce.
In this market this may include multifamily, single family, mixed use, and self-storage properties.
Acquiring Distressed Assets
There are plenty of both opportunistic and value add plays available in this market. Whether that is office buildings for repurposing, condo projects or SFR developments builders need to cash out of, or aged multifamily properties where landlords are ready to cash out.