With real estate investing booming, investors are increasingly looking for new opportunities to diversify their portfolios and acquire properties before prices increase. As analysts forecast that 2015 will see improved performance in the housing market from the previous year, investors could focus on these three national trends for REITs and real estate investment in 2015:
1. Residential REITs Boosted By Homeownership Rate Increase
The asset type known as an REIT, or real estate investment trust, is increasing in popularity because it offers sizeable returns and allows investors to specialize in one property type. Analysts predict REITs will continue to have strong returns in 2015. The value of REITs will likely grow because of greater development and occupancy gains, according to the National Association of Real Estate Investment Trusts.
Brad Case, NAREIT senior vice president, said even if interest rates increase, REITs will see solid returns because of improved growth opportunities, REIT.com reported.
"What we've seen historically is that REITs have more often had strong positive returns than weak or negative returns when interest rates are going up," Case said, according to REIT.com. "That's because interest rates normally increase in response to strength in macro fundamentals, which drives increased net operating income, higher property values and dividend growth."
Greater real estate investment will likely result in more land development and home sales.
2. Greater Development to Boost New Home Sales
With higher construction activity and accelerated new developments for residential properties, new home sales will likely increase. According to the National Association of Realtors, new home sales are projected to rise 37 percent in 2015. In addition, housing starts will grow 23.3 percent. Overall, the housing market is anticipated to improve alongside the growth in the economy, with total U.S. gross domestic product is forecast to increase 3.1 percent for 2015, according to NAR.
Homeownership rates could also reach higher levels as rental rates increase, ETF Trends reported. Increased development will create more supply in the housing market, potentially slowing some of the single-family home price gains that could have squeezed buyers out of the market in 2014.
"More supply will help ease the crunch, both from new construction and as current renters transition into homeownership, creating more vacancies in existing developments," said Zillow Chief Economist Stan Humphries.
3. Texas Cities to Surge to Top Real Estate Rankings
While coastal cities have seen a boom in housing values, investors are increasingly setting their sights on the Midwest and South. PwC and the Urban Land Institute ranked Austin and Houston the first and second-best cities, respectively, for real estate investments in 2015. Texas cities are attractive to investors because of higher job and wage growth, and relatively low cost of living, resulting in greater housing demand in Austin, Houston and points in between. ULI Global Chief Executive Officer Patrick L. Phillips said investors are more likely to invest in these markets because they are more competitive.
"Investors are looking closely at opportunities beyond the core markets," Phillips said in a statement. "These cities are positioning themselves as highly competitive, in terms of livability, employment offerings, and recreational and cultural amenities."
New construction and development for the housing market is forecast to grow.