Wondering how the rental market is going to look this year? The COVID-19 pandemic has disrupted the housing market trends since the spring of 2020, so there’s still a lot of uncertainty. Can we make predictions? Well, we’re far enough into this pandemic that we can reasonably predict how people will react to these changes. Real estate investors and landlords need to follow these trends to be prepared for the future. Let’s take a look.
As the coronavirus pandemic took hold across the world, the resultant lockdowns interrupted the predictable seasonal real estate trends. While many people got laid off as parts of the economy closed, others transitioned into a new rhythm working from home. These forces have influenced the rental market and will continue to do so in the coming year.
Rental market analysis shows that, in general, people are moving out of urban areas and into the suburbs and rural spaces. Remote work creates more flexibility in people’s home location, and rents are more affordable the further away you get from the city. There are four main trends we will look at in this article: flat rental prices (at least in the first half of the year), growing demand for affordable housing, a highly competitive buyers’ market, and the popularization of virtual real estate.
During the first COVID-19 wave in the US, we saw massive layoffs, which caused a massive spike in unemployment. Even a year later, employment numbers have not fully recovered. With little to no government assistance utilizing Economic Impact Payments, many people are struggling or completely unable to pay rent. This is why we see rent prices dropping.
Rent prices will remain flat (or drop even more) until people start making more money by reentering the workforce. Hopefully, as more people get vaccinated, more employers will open up their doors again. We hope to see a rebound in rental prices in the second half of the year as employment recovers. This rebound could happen sooner if the federal government can issue regular economic impact payments. These monthly federal relief payments would help tenants pay their rent again, thus saving the prices from dipping too low.
While rent in large cities has weakened, suburbia has seen some increase in rental prices as people move away from areas with dense populations. Single-family units are most popular. With parents working from home and children practicing distance learning, many families need the extra space (and privacy) that can be found in suburban rentals.
Many people are experiencing financial hardship right now, which has only been exacerbated by the pandemic. There is a massive shortage of affordable housing in this country despite its essential role in reducing economic hardships. Many folks in the renting market have lost their jobs and will be evicted after the national moratorium expires at the end of March 2021. At that point, they will seek to find a place to live that they can afford. For this reason, the demand for affordable housing is going to continue growing.
However, COVID-19 has made it even harder to create new affordable housing due to supply chain and labor disruptions. Not only do more people need low-cost housing this year, but this same housing has also become harder to produce. New York City developers have paused many affordable housing construction projects as they struggle to maintain their labor force and supply chain amid the pandemic.
Ultimately, affordable housing’s consistent high demand has shown us that it is a worthwhile investment for the long term. Depending on how long this pandemic extends into the future, its negative impacts on the economy may prove affordable housing to be the best real estate sector to invest in right now.
Rents may be going down, but house prices are skyrocketing. There are a few reasons for these recent housing market trends: low mortgage rates, low supply, and high demand.
Mortgage rates are meager right now, hovering around 3% or lower. This is a product of the current weak economy. By itself, this would make this year a great time to purchase a new home or invest in real estate. However, many houses are coming in with bigger and bigger price tags, creating a steep barrier to entering this market.
Another reason houses are so expensive right now is that so few of them are on the market. People just aren’t selling. Many homeowners are refinancing their mortgages to take advantage of the low rates. This can be a better financial decision for many people than selling their home for a cash-out because the other houses for sale are even more expensive.
Other folks may be holding onto their properties out of concern for their safety. Traditional real estate practices when making a purchase or a sale involve lots of in-person meetings. Baby boomers currently make up the largest segment of homeowners, and they are also the most vulnerable to COVID-19. This means older homeowners may wait out the pandemic before making any real estate decisions.
In addition to low supply, there is also a high demand for housing right now, creating the perfect storm to inflate prices. Many consumers are currently working from home, which means they’re looking for larger spaces for themselves and their families to spread out. Now that everyone is at home, many families find that a house in the suburbs is more attractive than a city apartment.
As the pandemic drags on, every industry has adapted to new operations, and real estate is no exception. Even before COVID-19, virtual real estate listings had become an essential factor in consumer decisions. People would spend time looking up listings online and looking at photographs, making judgments about the property before ever visiting in person. Since the coronavirus, this practice has expanded into virtual tours and exclusive online communications. Many professional property managers have gone virtual as well, revolutionizing real estate.
Online communications between landlords and tenants are comfortable with one of many property management apps. These keep everything you need in one place: payments, documents, property information, and more. This is a huge step in turning property management into a location-independent endeavor.
Because in-person viewings are discouraged, virtual listings and tours have become popular. With these tools, prospective tenants and buyers can view the property from their current home’s safety. These do take some extra effort to set up correctly, like making sure there are enough photographs to represent the space accurately, but it’s easier for sellers than keeping their home spotless for last-minute tours!
Another thing to keep in mind when discussing real estate’s new virtual face is that millennials are a large chunk of the market now. Folks in this generation have had technology like the internet since a young age and have adopted it into their everyday lives. Millennials are very comfortable using advanced technologies; for many, paying rent online is much easier than writing a check or paying cash. This goes to show that virtual real estate is here to stay.