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What’s going to happen to the U.S. real estate industry this year? Will 2022’s trends continue or will we see a few surprises?
No one can give you an accurate prediction. But even if the U.S does experience a recession this year, we think there will still be plenty of opportunities for real estate investors and those interested in real estate crowdfunding.
So here are 5 expected trends for U.S real estate investment in 2023
You might have heard quite a lot of doom and gloom about the housing market recently. High inflation is a big problem across the world; many central banks are trying to return to 'normality' by raising interest rates, which has a knock-on effect on mortgage rates. That's why the demand for mortgages is falling, which will affect housing markets differently.
But our view here at Bricksave is that 2023 could be a good year to start investing in real estate. We expect rental demand to continue to grow, with cash remaining king as mortgage demand is suppressed. The current economic climate is ripe for strong rental cash flows from relatively affordable properties that have plenty of potential to increase in value in the medium timeframe.
With house prices predicted to fall in many markets but rise in some others, there are plenty of opportunities for buyers. You could benefit when the market moves in either direction, earn an income from rental cash flows and achieve long-term capital growth.
Most of the properties we advertise on our crowdfunding platform offer an expected annual rental return of 8% to 10%.
In comparison, the average annual dividend yield (return) of the S&P 500 hasn't exceeded 3% since the 1980s (the S&P 500 is the Standard and Poor's 500 Index, which tracks the performance of 500 large companies listed on U.S. stock exchanges).
Recent research from tech and real estate marketplace firm Zillow suggests that Philadelphia and Miami will be among the ten best-performing real estate markets in 2023.
Home prices in the Philadelphia metro are expected to rise by 5.7%, with a 0.6% rise in home sales, according to research from Realtor.com.
Miami is also poised to defy national trends and maintain its real estate growth.
Charlotte, North Carolina, is tipped to be the best-performing market in the country, with Zillow predicting record home price growth there.
Up to November 2022, the cities that witnessed the largest annual increase in monthly rents were Baltimore, Maryland ($1,380), Akron, Ohio ($690), Fort Lauderdale, FL, ($2,120), Miami ($2,660) and Jacksonville, FL ($1,250). Figures in brackets refer to median home prices.
Notice that two of these locations are in Florida. This is because there has been a large increase in internal migration to this state since the pandemic.
When Money.com interviewed a group of economists late last year, all of them were optimistic that the U.S would avoid a deep recession in 2023. While they warned that the slowdown in home sales would continue until later in the year, they also anticipate an increase in buyers and sellers, once mortgage rates start to fall.
In fact, Dannielle Hale, chief economist of Realtor.com, expects the number of homes for sale in the U.S to rise by 22.8%. However, she stressed that much of this increase will be due to a large number of homes taking longer to sell.
A quick recap of last year’s key trends:
Home sales fell
Data from the U.S's National Association of Realtors found that home sales fell by 4.6% in October 2022. This is because the recent rise in interest rates has made it harder for people to qualify for mortgages.
But home prices rose
Despite the fall in sales, the average price of home sales in the U.S rose by 6.6% year-on-year to $379,100.
About half of investors still choose real estate
According to iBuyer, 50% of Millennials who invest choose real estate. 85% believe it is a good investment, although their parents, the Baby Boomer generation, are still much more likely to own a home.
One of the benefits of choosing Bricksave is that you don’t need a large mortgage down payment or hundreds of thousands of $ in the bank to get started. In fact, with our crowdfunding platform, you can invest in U.S. real estate with as little as $1000.
In a report published last autumn, Zumper reported that the real estate and migration trends of the pandemic are already beginning to unwind. This is most apparent in areas that received a large influx of new residents when work-from-home policies were introduced in early 2020.
During the first lockdowns in the spring and summer of 2020, many young professionals moved back with their parents, which led to a rise in rental vacancies in America’s largest cities. That trend appears to be reversing; Zumper CEO said more renters are hunkering down 'in anticipation of a recession' and are delaying 'major economic decisions'.
New York City is still the most expensive real estate market in the country
By September 2022, almost half of office workers were back in New York City on a typical weekday, while the proportion of office jobs that were fully remote here fell from 28% in April 2022 to just 16% by September.
The average cost of a 1-bedroom flat and a 2-bedroom flat in the city rose by 19.2% and 27% respectively in the year up to November 2022.
New York City is almost guaranteed to remain the most expensive real estate market in the U.S in 2023, despite the recent fall in rental prices and rise in vacancy rates in the early pandemic.
The average rent for a one-bedroom flat in New York is almost twice as high as Chicago
In New York City, the median cost of a 1-bedroom apartment was $3,790 in November 2022, compared to just $2,430 in LA and $1,870 in Chicago.
But the real estate market in cities like Chicago and Minneapolis has also witnessed month-over-month price rises, signalling that more people are returning to these metropolises too.
And because real estate rules and regulations vary from city to city, you may find it much easier to use an online marketplace run by the pros
Thousands of investors have chosen Bricksave so they can avoid the hassle and cost of having to navigate local planning laws on their own. We handpick institutional-grade investment properties and take care of the boring legal and administrative work so you don't have to.
There will always be a strong demand for cheap and affordable long-term rentals in the U.S, especially in areas where higher property prices make it harder for people to save enough money for mortgage down payments.
And you don’t have to be an ‘expert’ to invest in U.S real estate
With our platform, you don't need any investment experience, or expert knowledge of the real estate sector or region you’re investing in, to get started. Our team's advisers and risk managers have the expertise and resources to find the best investment opportunities to save you time and money.
The real estate sector has been traditionally slow to adapt to new technology. We're changing that by becoming the world’s first company to launch a fully regulated, securitised real estate token.
Tokenization is the conversion of a piece of real estate into a digital security token that you can trade with other investors. These tokens can be stored on a secure blockchain network, a technical infrastructure that stores data transparently in blocks that are linked to a chain.
What opportunities does tokenization provide for real estate investors?
Investors can exchange a normal currency (such as $) or a crypto currency (such as Bitcoin) to convert it into a real estate token, a share of the real estate asset.
For example, if you tokenize a 3,000-square-metre property worth $300,000, you could divide the asset into 1,000 tokens. That would mean each token (share) would be worth $300 and would represent 3 square metres ($100 per square metre). Only a few years ago, this seemed inconceivable.
Tokenization allows you to sell and buy real estate assets quickly, affordably and without having to use a bank. This also makes it easier for crowdfunding platforms to attract new investors.
Compliance requirements can be coded into a security token contract, which negates the need for lawyers, accountants and financial advisers to check that a transaction is legal, thus reducing the overall cost.
Tokenized assets are still backed by physical assets. They differ from crypto assets, which are speculative and much riskier due to their extreme volatility.
You can trade real estate tokens in real-time, which makes them more 'liquid' (in layman’s terms, that means it's easier to convert your asset into cash without affecting its market price).
A more-liquid market can lead to increased yields (that means you can earn a better return on your investment).
There are lower entry levels for real estate investors who don't have a lot of investment experience or capital. Or to put it simply, you can start investing with much less cash.
Bricksave is delighted to announce that it recently secured $3.2 million from a multi-stage investor, Graphene Ventures, which has invested in high-growth tech companies such as Just Eat and Snapchat.
We plan to use our new capital to expand into new markets in 2023
We are looking to acquire new properties in Switzerland and possibly Saudi Arabia, to diversify our international portfolio, give our investors a wider choice of properties, and help them capitalise on real estate growth across different markets.
We expect to complete our current round of financing in the middle of February.
Our team is continually assessing thousands of data points across hundreds of markets to source the best real estate opportunities for our crowdfunding platform.
At Bricksave, we have strict due diligence procedures to ensure properties are thoroughly vetted before they are launched on our crowdfunding platform.
After a crowdfunding round, if enough funding is raised to match the value (target sum) of the property, it will usually be rented to tenants within a month (all tenants are vetted).
As an investor, you'll own a % share of the property, which will reflect the amount of money you invest. For example, if you invested $3000 in a property worth $300,000, you would own a 1% share.
Most of the properties we buy in the U.S. are covered by Section 8, which is also known as the Housing Choice Voucher Program. This is a federal government program that provides affordable housing to families on low incomes, people with disabilities, and the elderly. Tenants living in Section 8 properties receive government-funded housing vouchers to help them with their rental costs.
These properties can provide a stable and guaranteed monthly rental income.
If you’re buying a Section 8 property on your own, you’ll have to deal with a lot of government bureaucracy before you can become an approved landlord. Fortunately, Bricksave takes care of all this red tape to save you ample time and money. Once we have acquired a property, we can sell it to individual investors via our real estate crowdfunding platform.
Conducting tenant background and credit checks can be time-consuming and costly. Again, Bricksave takes care of all this so you don’t have to.
At Bricksave, we embrace Section 8 and are proud to offer high-quality, affordable properties to families that may struggle to find decent homes in the mainstream rental market.
We acquire a large number of properties that have been previously abandoned. By refurbishing these properties to a high standard before bringing them to market, we can improve the availability of affordable, good-quality housing within a locality. Demand for the Section 8 program is also very high: the U.S Government is already proposing 200,000 additional housing vouchers to be awarded for the fiscal year starting on July 1st, 2023.
Rental caps also keep Section 8 homes affordable for those who need them the most
Section 8 housing is subject to rental caps to prevent prices from becoming unaffordable for those on the lowest incomes. The U.S. Department of Housing and Urban Development (HUD) requires landlords of Section 8 properties to set their rents in line with the Fair Market Rent (FMR) rate, which will vary depending on the location. However, bear in mind that the HUD usually increases the FMR rate each year, and the payment standard can range from 90% to 110% of the FMR.
In 2023, the national FMR went up by an average of approximately 10%, which exceeds the latest U.S. annual inflation rate of 6.5% (December 2022). Although there are some striking regional differences in annual FMR rate increases, the cap (which is already accounted for in our advertised yields) is unlikely to impact negatively on your returns.
Learn more about real estate crowdfunding with Bricksave
Contact us today to find out more about how we can help you get started with real estate investing!
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