July 3, 2022

What Recent Sales Trends Say to Investors

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The average cost of a pre-existing home has risen 15% since last year. Interest rates are back up to pre-pandemic highs, topping 3.5% for a 30-year fixed mortgage. Many people are returning to the office, perhaps not being granted permanent remote status as they expected. All of these aspects led to home sales falling far more than expected at the start of 2022.

While experts have seen a drop in home sales on the horizon for some time now, the month-over-month decrease between January and February was a surprising 7.2% for pre-existing homes. With mortgage rates expected to continue climbing, this is a number that real estate investors are watching closely. But, what do all these numbers really say? 

Low-End Supply Continues to Tighten

While mortgage rates are deterring some buyers, there's another key element holding back sales: An all-time low supply. At the end of February, a mere 870,000 homes were up for sale on the market, which is 15.5% lower than the same time last year. With the current pace of sales, this represents just a 1.7-month supply. 

Even with rising rates and sales prices, there are still plenty of buyers on the market and that strong demand has created interesting scenarios throughout the pandemic. Unfortunately, the nation is still in a crisis over affordable housing.

The tightest market overall is for homes priced between $100,00 and $250,000, which is c from last year. Meanwhile, home sales between $750,000 and $1 million are up by 24%. Sales over $1 million have also increased by an astonishing 21%. This is one of the many signals telling investors that affordable developments and multi-family housing complexes are in higher demand than ever. 

Numbers Are Not Signifying a Market Crash 

Despite many media outlets using these exceptional times as an opportunity to put out attention-grabbing headlines, it's unlikely that a market crash is coming anytime soon. While 2022 will prove to be another extraordinary year for real estate, all signs point to a healthy, albeit very challenging, market.

With inventories at record lows and demand at an all-time high, the supply-and-demand equation simply won't allow for a price crash. Meanwhile, builders have been trying to keep up with that high demand for years, and it's unlikely they're going to be able to outpace it and "overbuild" in the next few years. 

Lastly, lending standards have forever changed following the 2008 recession, meaning that "liar loans" just can't be found. With the amount of documentation and income verification necessary to be granted a loan today, it's tough to imagine a scenario where a great deal of buyers will end up being granted a mortgage they can't afford. Add to that rising job growth and wages, and the market doesn't look primed for a crash anytime soon. 

Today's Market Requires More Diversification 

If there's one thing that investors should take away from all of the reports and statistics about the current real estate market, it's that uncertainty and risks require greater diversification than ever. Achieving that diversification is best done through a combination of multiple investment vehicles, including equity crowdfunding and tokenization.

Are you interested in learning how Infinity is helping real estate investors diversify their portfolios and maximize risks during these unprecedented times? Reach out to our team at invest@infinity.re.

Valentina oversees Infinity’s business development, corporate structuring, global expansion, and administration. She has over 10 years of international experience working, including a venture capital firm and a unicorn startup. She holds a Bachelor of Science in International Economics & Management from Università Bocconi.

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