Reed Pirain is an award-winning real estate agent in the Metropolitan Pittsburgh area. In the following article, Reed Pirain discusses multi-family investments in real estate, and if 2023 is the year to make the most out of these investments.
As inflation continues to rise, more and more Americans are being pushed out of traditional single-family homes, leading many to speculate about the multi-family real estate market in 2023. Over the last few years, multi-family investments have seen a steady rise in value, but many experts are predicting that 2023 could be the year that this trend beings to slow.
In the following article, Reed Pirain examines some factors driving current market trends and discusses what the future may look like for multi-family real estate investments. Although the year is still young, many investors are wondering whether to double down or pull out of the market and wait for prices to stabilize. Reed Pirain can help provide more insight and guidance for better judgment.
2022 was the Perfect Storm of Market Factors
Reed Pirain says that the past year saw a perfect storm of over-inflated market factors that contributed to the rapid increase in multi-family real estate investments. These factors include a decrease in the supply of housing due to the pandemic, an influx of capital from outside investors, and generally low-interest rates. Reed Pirain says that this combination of factors caused a surge in demand for rental properties, driving up the prices of multi-family real estate investments.
The low-interest rates also made it easier for investors to obtain financing, which Reed Pirain says had further increased the demand for multi-family real estate investments. Additionally, the pandemic caused many people to move out of their single-family homes and into rental properties, as they looked for more affordable living situations.
This further increased the demand for rental properties, driving up prices even further. However, with inflation at a half-century high, Reed Pirain says that the Federal Reserve has been forced to hike interest rates, spreading fear throughout the real estate market.
2023 Could See a Cooling Effect in Multi-Family Real Estate Investments
Now that the market has been over-inflated, many experts believe that 2023 could see a cooling effect in the multi-family real estate market. This could be due to a number of factors, including rising inflation and an increase in the cost of living. As inflation rises and the cost-of-living increases, it becomes more difficult for investors to obtain investment financing.
Reed Pirain reports that this could lead to decreased demand for rental properties and a decrease in the prices of multi-family real estate investments. As investments fail to produce a turnover, real-estate developers and their financial backers could get cold feet and hold out until the current market improves.
However, this doesn’t deny the fact that, with more people now looking to forego traditional single-family homes, creating an increased demand for rental properties. Reed Pirain says that this could help to keep prices stable for the time being, but with costs of living at such a high, it’s unlikely that buyers will be able to afford current prices. Instead, we seem to be in a period of market stagnation.
The Current Downturn is Expected to be Temporary
Despite the potential for a market cooling effect throughout 2023, many experts believe the current downturn is only expected to be temporary. The pandemic found a decrease in mortgage applications, and an increase in rental agreements, and this trend is likely to continue until housing prices drop to pre-pandemic levels.
Additionally, it’s unlikely that the Fed will enforce higher interest rates any longer than it has to. As the last decade has shown, the economy does well when interest rates are low, up to the point that inflation sets in. Once the American and global economy begins to normalize again, it’s likely that the Fed will lower interest rates, prompting a surge in lending and investments explains Reed Pirain.
It’s unclear when this will be, given the ongoing fall-out from supply chain issues and higher fuel prices but, it’s unlikely that current economic conditions will reach the same catastrophic heights as in 2008. Instead, it’s in investors’ best interests to hold out, brace for a slower year, and then double down once this temporary speed bump passes.
Final Thoughts on the Multi-Family Real Estate Market
Overall, the outlook for the multi-family real estate market in 2023 is uncertain, as inflation continues to rise, and more people are looking to forego the single-family home. However, many experts believe that the current downturn is only expected to be temporary and that the market will eventually stabilize.