One of the key underlying drivers for these trends is a relocation from big cities to the suburbs — a development that was occurring before 2020. But it was accelerated by the COVID-19 pandemic. But there are several other important changes in the real estate space to keep an eye on over the next 18-24 months. Here are trends that can be advantageous in buying or selling real estate now.
House Hunting Goes Digital: Some buyers purchased their homes without stepping foot inside. Getting a mortgage can be done online too. And millennials turn to technology to learn more about new neighborhoods. If you’re a seller, you can take advantage of virtual capabilities such as 3D tours, drone videos, and virtual staging to showcase your property to potential buyers. If you’re a buyer, you can take advantage of virtual tours to view properties without having to travel.
People Move from Cities to the Suburbs: Opting out of big city living may persist for at least the next 3-5 years. Those who cannot afford to stay are moving out of necessity. The wealthy are relocating by choice. Those who have lost their jobs and can’t afford big city prices are moving in search of more affordable housing options. Finally, the suburbs are an attractive destination due to lower taxes and cheaper housing and rent prices. Some who are moving out of big cities are looking for suburbs that retain some of the big city feel — single-family homes with some of the conveniences of a big city, such as good public transportation, high walkability scores, shopping, and restaurants. If you’re a seller with a property in the suburbs, this trend could work in your favor as there is an increased demand for properties in these areas.
The Sun Belt’s Popularity Continues to Rise: The Sun Belt is the swath of the US that stretches from California to North Carolina and encompasses 18 southern states in between. Approximately 75% of the country’s population growth in the past 10 years has been concentrated in the Sun Belt states. In addition to its appeal to the retired set, the region is also becoming increasingly more attractive to younger professionals due to lower taxes and more affordable housing prices and rent. Additionally, even the biggest Sun Belt cities offer more space compared to the top US metro areas. If you’re a seller with a property in the Sun Belt region of the United States, this trend could work in your favor as there is an increased demand for properties in these areas.
Single-Family Housing Demand Creates Shortages: The migration from cities to suburbs is resulting in growing buyer demand for single-family homes. Single-family homes located in the suburbs are highly coveted. The demands for single-family homes are being driven by several factors, including low-interest rates, the growing importance of the home due to the quarantine, social distancing, and telework, and strong housing trends pre-pandemic. The pandemic-related demand for houses is compounded by another coinciding trend: Millennials entering the homeownership phase of their lives. If you’re a seller with a single-family home, this trend could work in your favor as there is a high demand for these types of homes.
Home Prices Continue to Rise: The current real estate trends are highly interconnected. Due to the increased demand for single-family homes and dwindling supply, prices for single-family homes shot up in 2020 and are expected to remain high in 2023 and beyond. Single-family home prices continue to rise. High prices are not deterring home buyers. Buyers continue to be willing to pay above the asking price to secure their purchase. If you’re a seller, this trend could work in your favor as it means that you may be able to sell your property for more money.
Mortgage Rates Drop: Homeownership was spurred by record-low mortgage rates in 2020, which hit a 50-year low. Rates have increased dramatically since that low, nearing 7% last year. These increases are driven by the Federal Reserve Bank’s attempts to reduce inflationary trends. Many think the Fed is near the end of its increases, and mortgage rates trended lower. We may not see 2 – 3% mortgage rates any time soon, but rates ought to fall to a more affordable range over the next few years. If you’re a buyer, this trend could work in your favor as it means that you may be able to secure a lower interest rate on your mortgage.
Rental Property Market Declines: Demand for rental properties has and will continue to decline in the biggest cities as people who can afford it look to buy a house and those who cannot look for other alternatives to save money. While rental vacancies are increasing in major metropolitan areas, demand for rental properties is actually going up in mid-size and smaller cities around the country as the demand for homes in these areas outpaces the supply. If you’re a buyer looking to invest in rental properties, this trend could work in your favor as it means that there may be less competition from other investors.
That wraps up our list of important real estate trends happening right now. As more people move to the suburbs and look to purchase a home, single-family housing prices are expected to stay high and supply low. Lower mortgage rates will continue to drive the demand for homes. In the meantime, the rental property market in large cities will remain in decline, which will provide opportunities for real estate investors planning for a post-pandemic recovery of city life. Signs of their reversal include a rise in mortgage rates and an increase in housing supply as construction catches up with demand.
It will be fascinating to see which of these trends were temporary or are legitimate, long-term trends likely to persist over time.
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