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Since the Great Recession in 2008, American real estate investors have seen their investment properties appreciate in value in the form of buy and hold properties, rental property investments, and home sales. The recent global pandemic in 2020 has disrupted the rental housing market for investors and landlords throughout the nation. This has led to the emergence of several new market trends throughout the year.
Here are five emerging real estate market trends worth keeping an eye on as these affect your investment moving forward.
Market Trend 1: Working from home in the suburbs.
In early May, Twitter CEO Jack Dorsey told employees they can keep working from home “forever” if they wish, or at least until the company hopefully re-opens its doors by year-end. Google went further. It offered employees who may be working from home until 2021 a $1,000 allowance to turn their home workspaces into areas truly conducive to work. And people are indeed working from home, many from new homes in the suburbs.
The New York Times reported in May 2020 that many city dwellers were suburbs bound where rent for a spacious home is more affordable, and chances of catching the virus are far less. Between March and April 2020, renters moving from the Big Apple to Connecticut, New Jersey, and Long Island rose by 74%, 38% and 48%, respectively, versus last year.
Californians from San Francisco and Los Angeles are also eyeing the suburbs of Santa Monica, South Pasadena, Berkeley, and Albany. Rentometer shared that in 2019, the average rent for a one-bedroom in San Francisco was $3,600 versus the $1,750 national average. The website Rent Jungle confirmed, meanwhile, that monthly rent for the same apartment in L.A. was $2,408 as of June 2020. That’s almost $1,000 higher than the national average during that period.
Real estate executives like Douglas Elliman however don’t think the exodus will last. “Like what happened after 9-11, people came back. It just depends on the time frame,” he said.
The work from home trend may prove to stick around longer as the cost of living continues to remain high in cities and social distancing is still mandated. Renters who are working from home may look for a home office and premium internet service. This may affect the demand and pricing of your rental property depending on its location.
Market Trend 2: Real estate is going contactless.
Virtual tours, e-signings, virtual inspection, online notarizations, and other contactless forms of engaging clients are redefining the real estate business. It is fast, convenient, and offers a safe alternative to transacting a home during the pandemic. It is also preferred by the digitally-driven Gen Z and Millennials who make up 65% of today’s prospective renters.
For those into buying and selling properties, iBuying is a simpler, hassle-free, online means to buy and sell a home. iBuyers simply invite the interested seller to enter the property details online; estimate its value; then make an offer. If the seller accepts, the iBuyers take care of owning, marketing, and reselling the home.
In Onerent we recommend using the 3D imaging platform Matterport for your listing photos throughout the entire rental process such as home tours, trouble-shooting maintenance, and move-in inspections. The platform has helped some 1,300 homeowners from over 700 cities in California, Washington and Colorado find the ideal renter while limiting physical contact and keeping transactions digital.
Contactless real estate has introduced convenience and safety to the industry through technology. Staying updated on this real estate market trend will benefit your investing decisions for the remainder of 2020.
Read more: Housing trends for millennials
Market Trend 3: Low mortgage rates
Mortgage rates are at its all-time low.
Last July, the 30-year fixed-rate has dipped below the 3% average for only the second time on record. The 15-year fixed-rate slid to 2.51% from 2.54% in mid-July, and 3.2% a year ago.
Those rates are a bonus for home-buyers with stable income, and a credit score that meets the tighter underwriting standards of banks and other lenders. But be prepared to go up against other buyers competing over a limited supply of homes.
It may not be as inviting though for the greater number of Americans who don’t qualify for a home loan. Banks and lenders have pushed the average credit score above 700 to reduce their risk. Millennial and Gen Z prospect buyers with a 673 average are disqualified.
For sellers still listed, scarcity and the still high selling prices should be a motivation to entertain offers. As of June 20, inventory dropped by 29% from last year but prices of the most affordable homes upped 5.5% from a year earlier during the 12 weeks ending May. The National Association of Realtors (NAR) observed that the up-tick has been going on for some 8 years even as inventory remained low.
Market Trend 4: To buy or not to buy
It’s still a green light for first time home buyers with steady employment, with the ability to pay for a downpayment, and are qualified to take out a loan just in case. Market conditions are favorable depending on the area.
The Wall Street Journal revealed that home buying may be returning to pre-pandemic levels led by people below 35 years old who make up 53% of the primary market. They are driven by the record-low mortgage rates; a desire for more space during the lockdown; a felt competitive advantage while the market was quiet; and freedom to move further away from their workplaces thanks to telecommuting.
Financial Education Associates President and Executive Director Jacqueline Cooper observed that due to fewer home listings, sellers are getting more offers and closing on sales quicker than usual. If you are not currently working and unemployed,” she said, “this is not the day to apply for a mortgage.”
Market Trend 5: Uncertainty in real estate
The truth is, nothing is certain even in today’s real estate market. The market scenario can change at a wink of an eye just as COVID-19 blindsided Americans and altered life as we knew it.
There are trends and data that can help us predict and speculate but with guarded optimism.
A “recovery index” compiled by Realtor.com shows that 16 of the 50 largest U.S. real estate markets display market activity that either reached or surpassed January levels. Still, the decision to buy or sell or rent elsewhere remains with the homeowner, the home buyer, and the prospective renter. It’s a decision based on emerging trends and gut feelings.
As of Quarter 3, 2020, we are still waiting to see when an effective vaccine for COVID-19 will be found. That being said, homes can still be sold, bought, and rented safely, virtually, and with minimal physical contact.
If you have not yet taken the plunge, prepare. Have your budget in order. Save up for emergencies, costs of down payments and the closing process.
Read more: Best time buy house