Real-estate investing in a down market: Strategies to use, how far home prices will fall, cities where prices are falling the most, which markets to invest in, and more

• Home prices are on the decline after their pandemic-era melt-up.
• That's bad news for current real-estate investors, and probably good news for prospective ones.
• Here's how to navigate today's shifting market.

After their historic pandemic-era melt-up, home prices have begun to fall back toward more realistic levels as high mortgage rates cut into affordability.

Home prices are down 4.1% from June to October according to the S&P CoreLogic Case-Shiller US National Home Price NSA Index, which lags by a few months.

Experts say the trend is set to continue. That's bad news for real-estate investors currently holding properties — falling home prices affect how much cash they can pull out of a house through a home-equity line of credit, and make flipping homes much riskier. On the other hand, it's potentially good news for prospective real-estate investors who have been sitting on the sidelines waiting for better deals.

Below is a list of Insider stories to help navigate the current real-estate investing landscape as prices fall.

First order of business: home price projections. It's up for debate how far home prices end up falling — some say they've almost bottomed and some say they have much further to fall. 

Let's start with Morgan Stanley. 

Morgan Stanley breaks down why home prices are due to drop in 2023 for the first time in over a decade — and shares 3 data points that are strikingly similar to the mid-2000s crisis

The bank says home prices will fall another 4% in 2023, which is on the lower end of forecasts. Still, it would represent the first time home prices closed out a calendar year in the negative in more than 10 years. 

The declines are due to the affordability being around the lowest levels in four decades.

"Affordability continues to deteriorate at a faster pace than at any point in at least the past 30 years," Egan said in a January 5 note to clients. "The YoY % increase in the monthly mortgage payment as a share of household income has more than doubled any other period over that time."

Goldman Sachs shares 4 cities that will suffer a 2008-size crash in home values — and breaks down why they believe home prices across the US will now fall further than they originally thought

Goldman Sachs has a slightly more bearish take. They see US home prices falling another 6% in 2023, putting peak-to-trough declines at around 10%. In certain areas of the country, losses will be worse, they said.

Strategists at the bank said their call is based on mortgage rates staying higher than investors are expecting.

"Our 2023 revised forecast primarily reflects our view that interest rates will remain at elevated levels longer than currently priced in, with 10-year Treasury yields peaking in 2023 Q3. As a result, we are raising our forecast for the 30-year fixed mortgage rate to 6.5% for year-end 2023 (representing a 30 bp increase from our prior expectation)," they said. 

A chief economist who called the 2008 housing bubble says home prices will fall another 15% over the next year as they remain too disconnected from buyer incomes and the supply of homes on the market grows

Other calls are more severe. Ian Shepherdson, the founder of Pantheon Macroeconomics who warned of the mid-2000s housing crisis, says home prices will fall 15% in 2023 thanks to unsustainably low affordability and growing supply.

"We estimate that single-family home prices have fallen by 5.4% from their recent peak in May 2022, but they still need to fall by a further 15% or so before they return to their long-run average, compared to disposable incomes," he said in a recent note to clients.

Why US home prices could fall 20% this year — and which cities and regions will see the largest declines, according to KPMG

Meanwhile, KPMG economist Yelena Maleyev said home prices could fall as much as 20% this year. Similar to Goldman's call, she thinks the market is underestimating how high mortgage rates will stay in 2023. 

Also like Goldman, Maleyev sees the destruction being worse in certain pockets of the country.

Dallas, Las Vegas, and these 13 other cities are the best markets for homebuyers as prices continue to decline in 2023

More on specific markets: New York-based home-lender Knock recently published a report highlighting 15 cities that will suffer the biggest home price losses this year, therefore making them the most attractive markets for buyers. 

All the cities on the list have a sale-to-list ratio below 100%, meaning that homes are expected to sell for less than what sellers are asking for them, Insider's James Faris reported.

16 cities where homebuyers are getting the most deal sweeteners and concessions from sellers as mortgage rates kill competition, according to Redfin

Redfin also recently shared a report on the best markets for homebuyers right now. The report highlighted 16 metropolitan areas where buyers are getting the most deal sweeteners. 

"Buyers are asking sellers for things that were unheard of during the past few years," said Redfin real-estate agent Van Welborn. Some of these include credits for repairs on the homes, mortgage-rate buy downs, and warranties on household appliances. 

10 smart real-estate investing strategies to follow now as nationwide home prices begin falling, according to a housing industry guru and investor

When it comes to strategy, BiggerPockets' housing market guru Dave Meyer recently shared his top 10 tips for investing in a down market. Some of them include using creative financing and looking to invest in "hybrid cities" —those with a combination of both modest cash flow and modest appreciation.

A real-estate investor who's acquired over 50 properties with the BRRRR method shares his best advice for using the strategy in today's market — especially as home prices fall and rents drop around the US

One of the most common financing strategies real-estate investors use to build up a portfolio is the BRRRR method: buy, rehab, rent, refinance, repeat.

But falling home prices can affect the "refinance" part of that equation. So can falling rents, which is happening in markets around the country.

But the method is still feasible, according to Kumar Sadaram, an investor who's grown his portfolio to over 50 properties using the strategy. But given the shifting market, there are certain risks to be aware of when using the strategy that may not have mattered even a couple years ago, he said. 

The biggest regrets recent homebuyers have, including locations, property types, and unforeseen expenses — and how to avoid them, according to an insurance company.

Speaking of risks, some of them are unforeseen to investors, reports Insider's Laila Maidan. If you're thinking about going into real-estate investing, here's what recent buyers wish they would have known before they entered the market, according to Hippo, a home insurance firm.