7 Real Estate Investing Predictions for 2022

COVID-19 just keeps morphing its way through the populace, complicating our pursuit of those basic needs like food and shelter.

But those needs must be met, and don’t let a little thing like a devastating global pandemic thwart your plans for capitalizing on the real estate investing opportunities that this plague — like every major one before it — unexpectedly reveals as society adapts.

That said, here are some predictions for 2022, as coronavirus variants continue using up the Greek alphabet like the nomenclature for an endless hurricane season.

A highway through a forest with 2022 in big letters on the pavement.

Image source: Getty Images.

1. Rising interest rates will help cool the housing market

The U.S. housing market is wrapping up a year that saw home prices hit record highs month after month and sales at their highest levels in 15 years. But the Federal Reserve has signaled rate hikes for the year ahead, and while mortgage rates don’t rise in lockstep with Fed moves, the National Association of Realtors forecasts the 30-year fixed mortgage rate to grow to 3.5%.

That’s still pretty low, but upward movement will add to the affordability issues that already appear to be muting sales growth. Expect that to continue. Investors need to be aware they might have fewer buyers for their properties.

2. Homebuilders will have a good year

The Census Bureau just reported that housing starts in November were at levels not seen since the 1970s, and permits — the first step toward starting and completing a house — continued to post year-over-year increases. A good way for investors to take part in that boom is through buying the stock of major builders such as PulteGroup and Lennar.

3. Single-family rentals will remain an investing sweet spot

Institutional investors have gotten a lot of the credit, or blame, for helping to drive up home prices, and a lot of that activity has gone toward building portfolios of single-family rentals (SFRs). In fact, the share of single-family home sales that were to investors rose to 18% last year, and it’s reasonable to expect most of that to become rental properties.

There already are acquisitive major players in this space, such as American Homes 4 Rent and Invitation Homes, and a new SFR real estate investment trust (REIT) that’s to emerge as a spinoff from the Blackstone purchase of Bluerock Residential Growth REIT that was just announced. In fact, how that spinoff fares could be an interesting indicator of how SFR stocks are going to fare in the near term, at least.`

4. Multifamily will stay strong, especially in the Sun Belt and exurbs

Blackstone is buying Bluerock for its 30 multifamily rental communities that are primarily in fast-growing Sun Belt markets like Atlanta; Phoenix; Orlando, Florida; Denver; and Austin, Texas. Meanwhile, the Census Bureau’s latest housing starts report shows multifamily starts keeping pace with single-family homes nationwide and that large metro areas are ceding significant market share to smaller cities. Investors should consider looking to these areas for the best opportunities in the year ahead.

5. Office real estate will continue to sputter

The assumption that 2022 would be a rally year for office real estate has been pushed back by the omicron variant surge. Apple has just said it now has no set date for bringing office workers back, and more companies will likely follow.

Meanwhile, white lab coat space, AKA life sciences, will continue to be in demand — good for REITs like Alexandria Real Estate Equities, but for white-collar workers and the landlords who depend on them, the next year looks it could be another one of sitting at home and waiting.

6. Industrial real estate will present diverse growth opportunities

Industrial real estate — especially that large chunk of it devoted to logistics — has been and will continue to be perhaps as hot as any segment of commercial real estate easily accessible to everyday investors. The dynamics driving the surge, including virtual shopping and e-commerce and the supply chain issues that are encouraging the growth of “just in case” instead of “just in time” use of warehouses, are going to hang around as long as the pandemic. REIT opportunities among the big guys, such as Prologis, as well as last-mile coastal specialists such as Terreno Realty, are possibilities.

7. Metaverse real estate will get more real

Among the many iterations of the metaverse are sites for buying, occupying, and renting out virtual real estate, including the brand-new MetaSpace Real Investment Trust (MREIT), which just popped up on a popular crypto trading platform. Watch for established players in the virtual gaming space and newcomers alike, including traditional real estate and other equally nonvirtual firms, to keep investigating metaverse real estate opportunities and growing their investment in the burgeoning virtual space. After all, virtual real estate is every bit as real as the cryptocurrency that people are willing to spend for it.

The more things change, the more opportunity can emerge 

Real estate plays a crucial role in any economy — good, bad, or infected — and that’s not going to change. Investors who pay attention to what’s happening globally and how that’s playing out locally can profit from the opportunities they present. Buying the right publicly traded equities at the right time will remain a great way to do that in the year about to unfold.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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