While the inflation rate has lowered from its four-decade high of 9.1% in June to 8.5% in July, American citizens are looking for ways to save money, increase their income, and invest intelligently. In times of volatility, many people look to real estate as a strong option to both increase cash flow as well as invest over the long term. While real estate appreciates over time, uninformed real estate entrepreneurs and investors can fall prey to the market. With nuanced Federal Reserve policy decisions and their effect on mortgage rates intersecting with regional market nuances in varying ways, real estate investors, entrepreneurs, homeowners, and customers are trying to navigate this complex melange of factors.
As is the case with many industries, real estate has evolved greatly since COVID-19. In addition to new norms in real estate sales, like virtual showings, the real estate industry at large is responding to new trends in American work life and personal life. Starting during the onset of the pandemic and continuing to this day, many residents and corporations located in large coastal cities have relocated to regions with more space and lower taxes like cities across Florida, Texas, and Atlanta. On the other hand, however, a handful of these coastal cities in states that purportedly lost residents may have never seen the dramatic decline reported, like cities in California. Additionally, many suburbs and cities surrounding Manhattan, like other cities in New York as well as cities in New Jersey and Connecticut, were actually the beneficiaries of the exodus from NYC.
With many variables in play, we caught up with industry leaders, Burton Wilkins and Neil Anders, to get their sense of current market conditions.
Interview with Burton Wilkins
Burton Wilkins is a luxury real estate agent working at ONE Sotheby’s International Realty and Goldcoast Sotheby’s International Realty. Known for his client-centric approach, Wilkins has risen to the top of the luxury real estate markets in South Florida as well as New Jersey. Specifically, Wilkins focuses on Miami, Florida and Ocean City, New Jersey. Leveraging his background in hospitality, market knowledge, and network of international clientele this dual-region luxury agent has leveraged major deals in both cities.
Do you believe home prices will continue to rise? Why?
I believe that home prices will stabilize for the next 6-12 months as rates continue to rise. Inventory continues to remain incredibly tight keeping prices stable.
Do you believe the residential rental market will continue to rise? Why?
No, I believe the long-term residential rental market will stabilize and slowly decrease in the next 6-12 months. The reason being at the moment in time it is cheaper for consumers to purchase than rent.
How will work from home (and hybrid models) affect the market for office space in the next year? How will this intersect with the residential markets?
The new normal of a remote working lifestyle has given the business owner the opportunity to get rid of their office space. With that monthly cost gone now, business owners are applying that budget to their homes. I’ve had a handful of clients that have upgraded their homes due to this situation.
The business employee is spending more time at home without having to commute to the office. This gives them the flexibility to live further from the city and or in a location they once weren’t able. This consumer is also valuing their home more than ever since they are spending a majority of their time at home. This means that they need more space to live and work from home, especially if their significant other is doing the same.
What do you think is the most overvalued real estate trend right now?
Purchasing real estate with BTC or Cryptocurrencies. A great majority of sellers and title companies won’t accept it. It’s more of a phenomenon versus a reality.
What do you think is the most undervalued real estate trend right now?
Virtual Tours, Metaverse, and comparable technologies.
Interview with Neil Anders
Neil Anders is a Certified Mortgage Advisor and Vice President of Sales at Trusted Rate. With two decades of experience in the industry, Anders’s name is synonymous with both sales and world-class service. In his previous position as Branch Manager of American Financial Network in Newport Beach, California, Anders played a pivotal role in helping the branch reach a $50 million sales average per month. Now as the V.P. of Sales at Trusted Rate, Anders and his team aid potential real estate buyers in purchasing new homes, refinancing their current mortgage, and determining pre-approval loan qualifications. Anders has personally invested in more than 7,000 transactions across his professional career.
Do you believe mortgage rates will continue to rise? Why?
Yes, I think mortgage rates will keep rising. Although government intervention to lower interest rates has assisted in their stabilization, I believe that we have reached a stage when the economy requires additional stimulus, and the Federal Reserve will be compelled to raise interest rates once more. But this increase can also lead to a rise in mortgage rates.
The good news is that some experts think these increases might not be significant enough to impact homeownership substantially. Even if they were, there would still be other options like refinancing a loan or asking for help from friends or family who might be able to help with payments until things settle down again.
How will work from home (and hybrid models) affect the market for office space in the next year? How will this intersect with the residential markets?
The market for office space is now shifting. Employees are using the work-from-home and hybrid models more frequently, meaning they spend less time in their workplaces than they once did. The need for office space is probably going to decrease.
Smaller places are now increasingly in demand as a result of this. Employees who don’t use their workstations all day don’t need as much space. Landlords have begun renting out smaller rooms and apartments to accommodate this tendency.
Flexible leases are more and more popular. Landlords are extending shorter lease terms to cater to employees who wish to work from home but may only need an office for a few days a week or a few days per month.
Due to the virtual nature of work, it is now possible for businesses to rent out space without really occupying it themselves. Instead, they can use conference rooms and other amenities whenever needed without incurring additional costs for rent or utilities. By renting only when necessary rather than paying for something that can sit empty for weeks at a time, they can save money (or even months).
What is the most important factor real estate investors are taking into account when choosing a new market right now?
The local rules and regulations are the most significant consideration for real estate investors looking to expand into a new market. The laws and ordinances that govern the region can have a substantial bearing on the amount of profit that can be extracted from an investment. If there are an excessive number of rules that make it difficult for you to make money, then it is possible that investing in that location is not a wise decision for you.
What do you think is the most undervalued real estate trend right now?
I think the shift from traditional brick-and-mortar businesses to digital ones is the aspect of the real estate market that is now being undervalued the most.
We have seen many businesses change their focus away from brick-and-mortar operations to focus on their online presence. However, I think we will start seeing more and more of these dynamics alter—especially as technology becomes more advanced and accessible.