Responding to Today: Real Estate Trends

Is Now the Time to Invest in Residential Real Estate?

Experts break down the opportunities—and challenges—across the United States and abroad.

Understanding Your Options

The ever-shifting real estate landscape may not be a strong buyer’s market. Yet more inventory and less competition make the environment increasingly favorable for investors. We spoke to experts from the Berkshire Hathaway HomeServices network and broke down the numbers to give would-be investors an informed path forward—in the United States and abroad.

Long-Term Versus Short-Term Rentals

Investors set on short-term rentals should be prepared for increases in competition. The number of available listings is forecasted to grow from 1,278,254 to 1,424,441. Demand for these rentals is slowing, however, with only a 5.5% year-over-year increase for 2023. That’s a sharp decline from 2022, when the forecasted year-over-year increase was 21.1%. The average daily rates for rentals, however, is holding strong, slightly increasing from $273.53 last year to a forecasted $278.19 in 2023.

Long-Term Versus Short-Term Rentals

While recent headlines herald a “softening” long-term market, the numbers tell a different story. Despite a slight decline in new-lease rents since summer 2022, rents nationally remain over 20% higher on average than they were when the pandemic began.

“The pros of investing in long-term rentals are that occupancy is guaranteed for a year or more and often the tenants are responsible for utilities. In terms of short-term rental investment, some pros are almost always higher rents and more flexibility if the owner wants to use the unit for themselves.”

Lisa Chandler
Principal Broker
Berkshire Hathaway HomeServices RW Towne Realty

Smaller Rental Units Are Trending Up

Studio apartments saw the largest rent growth nationally in 2022, a trend likely to continue well into 2023. Inflation and affordability will continue to be an issue for younger renters, making smaller units more attractive. Competition for all rental units—especially in larger metropolitan areas—will continue to be high as rising interest rates keep more would-be homebuyers in the rental pool for longer.

The American Dollar Can Go Far Overseas

The strength of the American dollar is leading many U.S. investors overseas. Making this type of purchase even more feasible: Price increases in many desirable European markets—such as London and Mallorca—were slight to flat year over year. The promise of “Golden Visas,” programs offered by some countries that allow permanent residency to homeowners above a certain home price threshold, is enticing many American buyers to overseas markets.

“For individual investors coming from overseas, I’d recommend short-term rentals as the best type of investment. In London, we suggest one or two bedrooms for maximum return on investment. Investors should also know the rental must be up to a certain aesthetic standard, but I’d warn them not to overimprove as that might result in costs you’ll never recoup.”

– Martin Bikhit, Owner, Berkshire Hathaway HomeServices London Kay & Co

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