The May 2019 Fannie Mae Housing Forecast indicates a growing trend in new housing starts and existing home sales. The forecast doesn’t show where these homes are located, but it does show there is room for optimism in each real estate market. The question for investors is, what kind of neighborhood makes the best investment? Should you put your money to work in urban, suburban, or rural markets?
Where Are People Choosing to Live?
It can be difficult to discern trends in a mixed environment. On the one hand, President Trump’s Opportunity Zones could create opportunities in urban markets where many of these zones are located. On the other hand, millennials are beginning to buy their first single-family homes and are looking at suburban areas. Not only that, but movers are migrating from metro areas to the suburbs. These trends are happening as the market transitions from declining home sales into an upmarket trend and mortgage rates are creeping upward.
Another thing affecting real estate markets is the aging baby boomer generation. The second largest living generation is retiring, downsizing, and moving into 55+ communities.
Fannie Mae points out another trend in non-traditional home ownership–manufacturing housing communities. These can be non-profit communities, government-owned communities, or resident-owned communities, and they can exist in urban, suburban, or rural housing markets. What makes this attractive for some home buyers is the cost of ownership is often lower.
As you can see, all of the environments offer some benefit to the home-buying demographics. Seniors moving to retirement communities can choose one in an urban area, a suburban market, or a rural setting. The same goes for single-family buyers of any generation and those on the lower end of the economic scale have good choices in all markets too.
So Which Real Estate Market Should You Invest in?
Knowing where people want to live is only a part of the equation in determining what makes a good investment. It says something about demand, but it says very little about the actual math of the investment. As an investor, you should analyze home-buying trends, but also neighborhoods and communities and the property values. Choosing a good investment is as much about your own values as it is your investment strategy. If you know rural markets well, or a specific rural market, you might find better opportunities there than in an urban setting.
This goes just as well for real estate crowdfunding opportunities. Look for investments that provide a return based on sound risk assessment principles, but invest in what you know. If you understand multifamily markets and feel comfortable with those types of investments, there are plenty to go around. If you feel more comfortable with single-family homes or fix and flips, then put your money in those investments instead.
A good real estate crowdfunding platform will have a diversity of opportunities. As an investor, your task is to find the right opportunities for you. You can start by determining your values: What is your risk tolerance, do you prefer urban markets over suburban and rural, and do you like specific demographics of housing consumers? Are you more familiar with single-family, multifamily, or commercial real estate?
Once you narrow down your real estate investing interests, your investment style, and your values, begin looking for opportunities. When you make these judgments, don’t just focus on the potential returns. Also look at the cost of acquisition, holding costs, and property taxes. How much can you endure?