U.S. real estate in 2022. Part Two

Hello, friends!
This is Igor Svechin.

So what and who determines the demand for real estate?
Primarily homebuyers.

And here is a very curious fact: did you know that now the demand for housing is shaped by the generation of millennials, because it is now the most numerous. And demand begins to form at a time when millennials begin to think about starting families.

By the way, many believe that demand is formed by investors in residential real estate. I will disappoint you a little.

Here’s what the statistics say. Investors only buy about 19% of homes. In contrast, millennial homebuyers account for 43% of all home purchases. They are the strongest and most stable source of demand in the housing market.

However, real estate investor activity has also risen from pre-pandemic levels. It also helped support increased demand among primary homebuyers.

The question is: will such a high level of demand for residential real estate continue?

It seems to me that it will gradually decrease. And at the same time, the undervalued real estate that we pay attention to in Pittsburgh will also become less.

Already now, by indirect signs, one can see that demand is gradually starting to fall. I think this will continue as long as interest rates continue to rise (probably for several years).

Interest rates have risen incredibly fast over the past few months.
And while the stakes are still relatively low in a historical context, affordability is falling fast. According to Redfin, monthly mortgage spending increased by more than 43% in March compared to the same period last year (chart below the post).

Reduced affordability will have a real impact on the number of households entering the market. The National Association of Realtors® (NAR) estimates that 15% of first-time homebuyers will be forced out of the market this year.

But how many investors will remain on the market, and what investment strategies will be the most profitable, will be shown in the coming months of this year.

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