- High home prices and mortgage rates have sparked a downturn in US real estate.
- As housing activity fades, some analysts fear a housing crash is on the horizon.
Rapid home-price growth and soaring mortgage rates led to a dramatic downturn in housing demand throughout 2022, leading experts to speculate that the entire US real estate market could implode.
While the housing slump is escalating this year, there’s a brighter future ahead, billionaire real estate fund manager Grant Cardone told Benzinga, as published by Yahoo Finance. People like him, he said, will re-enter the market before it enters crash territory.
“Investors will step in to pick up single-family homes at lower prices with less competition,” Cardone said in a statement, according to Benzinga. “That being said, there will be no housing crash. Investors, like myself, will save the day and step in to buy the homes.”
In 2022, surging inflation and a series of Federal Reserve interest hikes dampened demand in housing by regular buyers and big investors who were snapping up homes by the thousands. Indeed, data from real estate brokerage Redfin shows that investor purchases of American homes fell a record 45.8% year-over-year last quarter — surpassing the decline seen in 2008 as a housing bubble was bursting.
However, there may be some relief on the horizon with 30-year mortgage rates holding below last year’s peak of 7.08%, and by at least one prediction, heading all the way down to 5.20% in 2023.
“It’s possible that investors will start to wade back into the market this year given that mortgage rates have ticked down from their 2022 high — especially if home prices show signs of bottoming,” Sheharyar Bokhari, a senior economist with Redfin, said in a report last week.
With housing affordability at a record low, home sales and prices have begun to retreat nationwide, especially in pandemic boomtowns like Austin, Texas, Phoenix, and Bozeman, Montana. Each of those places saw an influx of remote workers, robust population growth and unprecedented home price appreciation during the pandemic.
As the real estate market softens, strategists at Goldman Sachs projected various markets, including Austin and Phoenix, will likely see peak-to-trough home declines of more than 25%. As home prices decline, that could draw investors back into the market, per Cardone.
It’s a likely scenario as institutional real-estate investors have earmarked as much as $110 billion to purchase or build single-family-rental homes in the coming years, according to an estimate from real-estate-research and investment-banking firm Zelman & Associates.
The sum — which could add almost 400,000 homes to the existing inventory of roughly 700,000 single-family properties controlled by corporate landlords such as Pretium and Invitation Homes — is the largest ever amassed by US real estate investors. The investors have been so aggressive with their purchases they’ve been accused by consumer groups and local lawmakers of boosting costs for regular homebuyers.
Single family homes may be a new frontier for the billionaire known for authoring books such as How to create wealth investing in real estate.
According to Cardone Capital’s website, its real estate portfolio consists of 11,903 apartment units across 36 multifamily properties along with over 500,000 square feet of commercial office space.