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3 Ways to Profit From the Housing Market in 2023


  • The housing market is set to see a return to its once-robust status in the new year. The Fed began easing up on monetary policy, which many see as the first step toward a more sustainable market.
  • For investors that want the same thrill as day trading, house flipping can be a very fulfilling endeavor.
  • One of the safest ways to invest in the market are REITs, which offer income and stability in a volatile market.
  • Online property marketplaces are becoming integral to the real estate market.
Housing Market 2023 - 3 Ways to Profit From the Housing Market in 2023

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The housing market is still a popular topic, and with the recent economic changes, it is expected to remain so. The housing market in 2023 will differ from what we had in 2022.

Several prominent names, such as JP Morgan (NYSE:JPM) and Citibank (NYSE:C), have sounded the alarm for a recession in 2023. The principal reason is that the U.S. government and its institutions now fear a recession could occur in 2023. As a result, major financial institutions such as the Federal Reserve are easing up on their policies.

At the same time, Fed Chair Jerome Powell said inflation is cooling down. On Feb. 1, it raised its benchmark interest rate by a quarter percentage point, taking rates between 4.50% and 4.75%, the highest level since 2007. However, the rise was smaller than the hikes that came before.

These signs point to the real estate sector getting back on track in 2023. One of the biggest reasons the industry did so well in 2020 is that mortgage rates were at rock bottom. However, things turned ugly when the Fed started raising rates last year to control inflation. But since the start of this year, we have seen a turnaround in sentiment.

House Flipping

In the U.S., house flipping has been on the rise since 2008 as a result of low inventory, low-interest rates, and rising property values. Enthusiasm for home flipping grew in the first quarter of 2022. However, it tapered off as the year went by. This is because interest rates have gone up, and this has caused home values to drop.

However, house flipping could become a great option for real estate investors if the housing market starts roaring again.

Most flippers don’t spend much time and money on improving properties, but that doesn’t mean they aren’t valuable. Investors will pay the right price for them so you can make profits without too many expenses.

On the other hand, you can take a longer-term approach as well. Those kinds of house flippers will buy a property, renovate it and rent or sell it when it is the right time.

Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts (REITs) are a type of investment vehicle traded on a stock exchange. They are typically used for investing in real estate without a traditional real estate transaction.

REITs are some of the most popular investments amongst income investors because they distribute nearly all their earnings to their shareholders. To qualify as a REIT, a business must have the bulk of its assets and income connected to real estate investments and distribute 90% of its taxable income to shareholders yearly in dividends.

REITs are not just a solid investment but an incredibly dependable way to make a regular income. As with other stocks, REITs come with risks and uncertainties, along with that rewarding reward. However, the risk is palatable for most investors.

Unlike other types of real estate investments, REITs allow investors to potentially get into non-residential pieces of real estate that are generally not feasible for a single investor to invest in. REITs allow you to invest in a real estate property without needing an agent and don’t involve title transfers.

When deciding on REITs, one should know the difference between equity REITs that own buildings and mortgage REITs that provide financing for real estate. They also offer a wide portfolio of products such as mortgages, mortgage-backed securities, and more.

Within the REIT space, there are several options you can consider. For example, data center REITs such as Digital Realty (NYSE:DLR) and Equinix (NASDAQ:EQIX) will interest tech-focused investors.

Meanwhile, if you want to invest in retail, options include Kimco Realty (NYSE:KIM) and Simon Property Group (NYSE:SPG). Similarly, there are several other companies from a diversified group of asset categories that you can choose from.

Virtual Real Estate Platforms

Real estate investing platforms are virtual communities that connect investors with real estate projects. They cover both the commercial and residential real estate sectors. Investors can invest directly in new deals or participate in existing ones by lending their money with a return on investment promise.

Under this method, you still invest capital, but less so than if you make an outright purchase. There are several benefits to this approach. First, you can decide whether you want to invest in a single asset or a portfolio. Investors can also allocate capital based on their investment profile. This means there is no restriction regarding asset class or geographic diversification.

Overall, Online real estate platforms are becoming integral to the residential and commercial property market. They allow individuals to sell or buy properties from across the world easily. However, these platforms are not without their flaws.

Firstly, they tend to be illiquid with lockup periods, making it difficult for investors to exit these investments quickly. Secondly, management fees can be expensive and vary depending on the platform used.

However, on balance, they are good for investors that want a bit of flexibility in where they want to put their money in the housing market in 2023.

On the publication date, Faizan Farooque did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2023/02/3-ways-to-profit-from-the-housing-market-in-2023/.

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