For many, the spring season is full of meaning. It's often considered a time of renewal. That might mean planting a garden, deep cleaning your home, or refreshing your wardrobe. But for real estate investors, spring means the beginning of homebuying season.
Unofficially running from early spring to early fall, homebuying season is generally when the most home sales take place. This is likely because more pleasant weather makes things like touring homes and moving easier. That's why this "season" may only really exist in areas with at least somewhat harsh winters.
But regardless of where you live, there's a lot of data about the housing market available to real estate investors right now as the season takes off. That makes it a great time to check out these tips to keep in mind if you're considering adding property to your portfolio anytime soon.
Price cuts are up
According to recent data from Redfin, 12% of home sellers on its platform cut their prices in the week ending April 9. That's the biggest price-cut spike the site has seen since 2015. In a housing landscape where we've become so used to seeing constantly rising prices and homes being snatched up as soon as they're listed -- and often before -- that's a pretty big deal. So, investors may get to see a slight uptick in inventory and a slight downward trend in home prices this season.
Interest rates are up -- and likely to keep rising
Of course, the recent interest-rate increase may be the driving force behind the reduction in homebuyer interest we just discussed. The interest rate for the average 30-year fixed mortgage has risen from 3.11% to 5% over the past four months. And according to Reuters, economists expect rates to rise again in both May and June. That being the case, investors looking to buy this season may want to get busy right now so they can try to close any deals ahead of any further rate boosts.
Paying more may be worth it
So, while you're likely to finally encounter some softening in the price department, it's unlikely to be dramatic. There's still a good chance every home you're interested in will be priced quite a bit higher than you were hoping. And higher interest rates are obviously not what investors want to hear about either.
On the flip side, rental property investing is so hot right now that, in many cases, it may be worth paying more for the right property. Rent is way up. And with more would-be homeowners dropping out of the search, vacancy is unlikely to be an issue for most long-term landlords. As for vacation rentals, hosts saw their highest annual revenue ever last year, according to short-term data analyzer AirDNA.
How excited should investors be about this homebuying season?
While the hefty spike in price cuts is certainly a sight for sore eyes, the heft is in the number of cuts taking place rather than the dollar amounts. Most of these are not dramatic cuts, and that's unlikely to change anytime soon.
It's also true that the interest-rate situation appears to be getting less enticing practically by the day. But with both the long- and short-term rental markets performing incredibly well right now and boasting strong projections for the future, these obstacles may be worth navigating.
If you're considering a rental property investment this homebuying season, see what comparable properties in your area are renting for and crunch the numbers. You might be pleasantly surprised. And if you do decide to go for it, you'll probably be better off making a move sooner rather than later.