Three Emerging Trends that Could be Winners for Your Portfolio in 2022
By Strategic Passive Investments
To borrow from Charles Dickens, 2021 “was the best of times, (and) it was the worst of times.” While the United States – along with the rest of the world – struggled to recover from and adapt to the stubborn and constantly evolving COVID-19 pandemic that changed everything in early 2020, society, the real estate sector, and most aspects of the economy became increasingly divergent and extreme. While home prices skyrocketed and would-be homebuyers fought it out in increasingly wild bidding wars, others found themselves unable to pay mortgages or rent and unwilling to move out or sell because they had no idea where they would live if they did so.
As is so often the case, real estate investors often found themselves stuck in the middle, providing creative solutions and, sadly, often being vilified for doing so as they struggled to pay their own mortgages while tenants “sheltered in place,” largely immune to eviction orders. Since March 2020, we have seen incredible technological advancements in our industry, awe-inspiring acts of kindness, and heartbreaking moments of loss and devastation – and that does not even begin to include our political climate!
One thing remains certain for real estate investors, however: Real estate and housing are among the most reliable, profitable, and, it turns out, most recession- and pandemic-resistant investments for the 21st century. The key in 2022, as always, will be to effectively identify emerging trends that could represent potential for an investment portfolio. Here are three emerging trends that could be winners in 2022:
Mobile Homes Could See Another Surge in 2022
Mobile homes have long been a hot “alternative” asset for real estate investors willing to brave the sometimes-complicated issues that come with acquiring, owning, and operating mobile home parks. If you have not already explored this asset class, now is the time to take another look. According to Lending Tree, the median value of mobile homes has risen even faster than the median value of single-family homes over the past five years in 27 states. Although the national median value of a mobile home is just over $53,000 (far less than the national median single-family home value of $190,000), their value continues to climb even as single-family assets appear to be heading for a minor slow-down in 2022.
Lending Tree’s Jacob Channel explained, “Although they are worth considerably less, the median value of mobile homes increased by 39 percent from 2014 to 2019, six percentage points more than the 33 percent increase in the median value of single-family homes in that period.” He predicted that as interest rates rise in 2022, more Americans may consider “alternatives to the traditional single-family home,” such as a condos, townhomes, or mobile homes.
More Homes are Going to Hit the Market
While it seems unlikely that home prices are going to actually fall any time soon, analysts at Realtor.com and other platforms say they believe 2022 will bring an increase in housing inventory of nearly 7 percent. This is likely going to result from more homeowners opting to sell in 2022, thanks to hopeful feelings about being able to find another place to live, rising interest rates that make competition for listed homes slightly less intense, new home construction, and the end of mortgage forbearance programs that have been sheltering homeowners from foreclosure and eviction.
National Association of Realtors (NAR) chief economist Lawrence Yun predicted, “With more housing inventory to hit the market, the intense multiple offers will start to ease. Home prices will continue to rise, but at a slower pace.”
Nevertheless, most analysts agree that 2022 will still be a “whirlwind year” as millennial homebuyers enter the market, and more Americans seek alternatives to their currenting housing situation. With rents expected to outpace home price growth and rental vacancy remaining near historic lows, investors who own modern, updated rentals could find themselves in possession of extremely attractive residential options for many potential tenants.
Proptech is Coming for You
Through the month of November 2021, venture capitalists and other investors dumped $9.5 billion into a sector known as “proptech,” often in hopes of getting in early on the next big real estate tech tool. If you have heard the term “proptech” but are not sure what it means, then it is time to take a few minutes to explore the concept.
Proptech first started in commercial real estate, and it is an industry buzzword that describes technology that makes any angle of real estate (ownership, residence, lending, management, financial tracking, etc.) easier to navigate and manage for the parties involved. Common clients of proptech companies include developers, property management companies, and investors. Whether investors are looking for investment opportunities in proptech or just want to leverage the best resources and tools for their business, being aware of this emerging industry is important.
“The opportunity is big, and capital is flowing like water,” effused Mihir Shah, co-CEO of JLL Technologies, in a recent interview with the Wall Street Journal.
Platforms offering technology and business services to real estate investors are currently being valued as high as $1 billion, but not every proptech development is going to be positive for an individual real estate investor’s business. It may be tempting to jump in early on the implementation side, but many of these companies have gotten a great deal of hype from the over-eager investors and industry commentators. Be sure to vet any investments you might make and get referrals for any platform before investing time and money into new proptech.
2022 Will Be as Unpredictable as 2021
At the end of the day, real estate investors should accept that 2022 is quite likely to be as difficult to predict as 2021. After all, COVID-19 is still surging and ebbing, the political climate is acrimonious at best, and conspiracy theories about absolutely everything abound. Real estate investors must keep a level head and a close eye on real, tangible trends and developments to win in the New Year.