Markets are always changing, as countless factors impact the market on both a local and national level. Last year, the Covid-19 pandemic changed how people bought and sold houses as much as it changed how we live our everyday lives. As we work hard to return to normal, we’re left with a question: is the real estate market going to bounce back? High prices, low inventory, and growing interest in home ownership have all been commonly associated with this big swing in the housing market- but will they last? While many trends come and go, it remains to be seen which of these will remain for the next few years.
Here are the 10 key emerging real estate trends:
- Increased Homeownership – The pandemic showed people the true value of the freedoms associated with home ownership. Being social distanced from your neighbors, having increased privacy, and having the security of knowing your home is completely yours, have all lead to an increase in homeownership rates, increasing significantly in 2020 and expected to rise another 5% before the end of 2021.
- Steep Increase in Housing Prices – Increased demand for housing early in the pandemic lead to inventory shortages. When supply is short and demand is high, prices are going to rise. Despite lots of new construction to try and satiate demand, prices have remained high.
- Lower interest rates – People can’t buy homes unless they can afford to finance them. Despite the increase in sale prices, lower interest rates have kept the affordability ratio fair enough that buyers aren’t shying away from bigger sticker prices- in the long run, they’ll likely pay the same or maybe even less.
- Shift to less populated areas – Typically expensive markets in major cities became a secondary focus for buyers and investors alike. Second-tier cities, the suburbs, and even rural areas all became perfectly acceptable alternatives as many companies shifted to work-from-home operations. Prior to the pandemic, these areas had generally lower real estate prices, so once the opportunity presented itself, many moved out of the big cities with their eyes set on Small Town, USA.
- Millennial Home Buying Strong– Now a strong part of our economy, Millennials have grown up and are working hard to purchase their own homes. 38% of new home buyers are millennials, many of whom are now in their 30s or even early 40s.
- Affordable Homes Popular – With prices high, everyone is looking for a bargain. Despite price increases and shortages for many home improvement materials, 87% of home purchases have been resales. Buyers are willing to invest the time and effort to put TLC into an existing diamond in the rough, rather than settling for a turnkey home.
- Technology Sells – With buyers either unable to or unwilling to shop in person, the digital space for selling homes boomed. Buyers are shopping online, and professionals are using apps, social media, and smart home technology to get their listings to those interested buyers. Virtual tours and open houses have become alternatives, especially for long-distance buyers.
- Mortgage Interest Rates Expected to Settle – As the economy continues to rebound and grow, experts expect interest rates to rise and then settle. Make your mark while rates are low.
- More demand for luxury homes – In the third quarter of 2020, high end sales increased 60.7% year-over-year, and this trend is expected to continue. Existing home buyers were able to sell their existing properties and upsize to larger properties with more luxuries thanks to low mortgage rates. Being able to work remotely from home meant that many people decided that what would have typically been a vacation home could become their new primary residence year-round.
- Smart Home Technology – We live in a digitally interconnected world, and now even the appliances in our home can be synced and connected to our smart phone. Property managers have begun integrating this technology in rental units to try and retain some of their tenants. Personal homes have also seen a greater acceptance of this technology. Smart sinks, for example, have become very popular as they allow hands-free operation (a big plus during a pandemic)
The Covid-19 pandemic has left a strong effect on the US housing market. The next decade will be shaped by some of the trends explained here. Are you ready to capitalize on the current conditions, or will you be waiting on the sidelines? Markets are always changing, so remember that what seems impossible today may be certain tomorrow.