What are the Biggest Threats to the Real Estate Market? - Suburban Real Estate Group (2024)

FAQs

What are the Biggest Threats to the Real Estate Market? - Suburban Real Estate Group? ›

Economic uncertainty and market volatility are two of the most significant risks that real estate investors face.

“With interest rates rising to more than 20-year highs, it is no surprise that the biggest current concern for real estate firms is housing affordability,” says NAR Deputy Chief Economist Jessica Lautz. “This surpassed the concern of maintaining sufficient inventory, which we saw in 2021.”

Real estate investing can be lucrative but it's important to understand the risks. Key risks include bad locations, negative cash flows, high vacancies, and problematic tenants.

In the real estate sector everything from routine repairs and maintenance to property improvements to new construction are greatly impacted. Delays in deliverables, rising costs, shortage of labor and lack of materials are influencing nearly all companies and their related real estate.

1) Fear of rejection.

This is often the first thing to come to mind when realtors are asked to share their biggest fear, especially for those agents who are new to the industry. It's a scary thing to put yourself out there—to go door-knocking or cold-calling. What if someone gets mad? What if I'm bugging them?

Rising interest rates

Commercial property prices and interest rates are inextricably linked. Rising rates have a negative effect on property valuations. Unfortunately for the commercial real estate industry, interest rates have been skyrocketing.

What is the most challenging part of real estate? ›

Clients may contend that a real estate agent provided inaccurate information about a property, failed to disclose pertinent details, or offered misleading descriptions. Maintaining transparency and ensuring accurate property information is crucial to fostering trust with clients.

Invasive species are often considered the second most important threat (but see Dueñas et al., 2018). Invasive species are listed as a driver of extinction, along with other threats, for half of species extinctions since 1500 CE for which any information exists.

Global unrest, economic uncertainty and eroding home affordability are among the top issues facing the real estate industry over the next year, according to The Counselors of Real Estate's annual report, “Top 10 Issues Affecting Real Estate .” Each year, CRE surveys 1,000 real estate experts to gauge the emerging ...

Market risk is the most common type of risk associated with real estate investment. It refers to the possibility of a decline in property values or income due to changes in market conditions.

A sudden drop in homebuying demand can lead to a housing market crash. This can happen if a lot of would-be buyers lose their jobs during a recession, and are no longer able to afford to buy a house. If no one is buying houses, then home values plummet. Lower demand also typically occurs when mortgage rates are high.

Opportunistic strategy

Due to improved cashflows and reduced cap rates, the subsequent appreciation in the value of the property post-renovation is usually the most significant criterion for investment returns. Opportunistic investments are positioned at the highest end of the risk-return spectrum.