Best Places to Buy Residential Real Estate Right Now

Despite higher mortgage rates, residential properties are still a practical long-term investment, as reported by Bloomberg. 

Laura Mattia, a financial advisor at Wealth Enhancement, emphasizes the value of building equity, benefiting from tax deductions, and gaining inflation protection through homeownership.

Where to Look

While current interest rates remain elevated, buying in areas with strong amenities and job markets can help ensure long-term appreciation. Buyers should prioritize financial health, assess all associated costs, and focus on properties offering good growth potential.

Mattia also highlights opportunities in hurricane-affected regions, where distressed properties can be acquired at discounts. 

Investors should evaluate the risks, including damage rebuilding prospects, and assess the region’s long-term viability. Patience and due diligence are essential for success in these cases.

Recovery Potential

Patrick Carlisle, chief market analyst at Compass, identifies San Francisco’s downtown condo market as a major opportunity. Prices in the city have fallen to 2017 levels, creating rare bargains. High inventory and depressed valuations also mean that buyers have significant leverage, particularly during the mid-winter slowdown.

With office leasing rates expected to recover, demand for nearby residential properties is likely to increase. San Francisco’s history of bouncing back from downturns, coupled with its cultural and economic vibrancy, positions it for a strong rebound. 

Investors in both residential and commercial properties can benefit from aggressive offers during this window of opportunity.

Signs of a Revival

Rich Hill, head of real estate strategy at Cohen & Steers, notes that CRE is showing early signs of recovery, with listed REITs leading the charge. 

Since bottoming out in October 2023, REITs have rebounded nearly 40%, pointing to broader recovery trends in private markets. Sectors such as healthcare, regional malls, and data centers drive this momentum, underscoring the diversity within CRE.

Hill suggests listed REITs as a practical way for investors to gain exposure to the sector, offering liquidity and sectoral diversification. He also highlights the potential for innovative investments, such as rooftop solar panels on commercial buildings, which could unlock untapped value.

High Cash Flow

Short-term rentals (STRs) like Airbnbs (ABNB) remain an attractive option for investors focused on maximizing cash flow. Scott Trench, CEO of BiggerPockets, advises investors to target properties that could also function as traditional long-term rentals, ensuring stability if the STR market fluctuates.

Trench cautions against investing in vacation hotspots, which often come with high management costs and volatility during economic downturns. Instead, investors should explore local markets where regulatory dynamics create supply constraints, allowing for better returns. 

STR investments require a strategic approach to minimize risks and capitalize on market opportunities.

Looking Ahead

The Trump administration’s return introduces mixed implications for real estate. Deregulation and support for the sector may benefit CRE, while policies such as tariffs, immigration restrictions, and potential spending cuts could raise costs and prolong high interest rates. 

For San Francisco, reduced immigration may weaken demand, while changes to SALT tax deductions will influence the affordability of homes in high-tax states like California.