Baselane’s latest survey reveals that despite rising costs, real estate investors remain optimistic about the future. With 81% of investors planning to grow their portfolios in the next two years, this optimism comes with a cautious approach to financing and home prices.
Investors Are Expanding, But Cautious
The survey shows that although the number of real estate transactions may be down, investor sentiment remains strong. Over 81% of respondents intend to expand their portfolios within two years, although 17% feel comfortable with their current holdings and don’t see the need to grow immediately. Vacancy concerns have eased, with 52% of investors less worried than they were in 2023.
Affordability and Rising Home Prices Are Major Concerns
While vacancies are less of an issue, rising home prices and financing costs are front and center. The National Association of Realtors reports that the median home price in July 2024 reached $422,600—a 4.2% increase year-over-year. This, paired with fewer housing starts, is leading many potential buyers to stay on the sidelines, hoping for lower interest rates.
Rising Insurance and Taxes Impact Investor Profits
Nearly 22% of investors faced rental property insurance hikes of 11% or more in 2024, and 50% experienced property tax increases of over 6%. With home prices climbing, it’s no surprise that both insurance and taxes are following suit, putting added pressure on investor returns.
Conventional Financing Reigns Supreme
Despite various financing options available, 44% of investors stick with conventional loans for their purchases, favoring familiarity and reliability. While rates have dipped slightly to 6.2%, they remain a key focus, with investors closely monitoring fluctuations. Institutional investors continue to impact the market, with 18.7% of homes sold to them in early 2024, driving competition for independent buyers.
Rental Demand Remains Strong
While buying homes may be increasingly difficult for some, rental demand is climbing. Renting is currently 27% cheaper than owning in the top 50 metro areas, which is helping investors capitalize on the high demand for rental properties.
Final Thoughts
Despite the challenges of rising costs and competition, real estate remains a resilient investment. As long as investors adapt to the current climate, they can find opportunities for growth and profitability.
Survey Methodology
Baselane’s survey of 2,116 U.S. real estate investors conducted in June 2024 aimed to capture insights into investor strategies, financing preferences, and market outlooks. Responses were collected and analyzed to ensure statistically significant results, providing a comprehensive look into the current state of real estate investing.