At the beginning of November, I sold a 1 Bedroom/1 Bath unit in Marina Pacifica on the first
floor of a Key for $719,000. It was a beautiful place, and I was able to get top dollar for it. While
showing the listing, quite a few people asked me when real estate will pick up. The reasons for
the slow-down is partly seasonal, partly the higher interest rates for borrowing (we did receive
some relief this past week) and the fact that many homeowners refinanced their homes during
the COVID pandemic at rates of 3.5% or lower, so it makes the decision to move more difficult if
they will need to take out a loan on the next place they will buy.
I make an effort to keep up with trends and changes in the real estate market. While no one
knows exactly what will happen, I liked a report that identified six trends set to impact the real
estate industry in 2024 and beyond. The COVID-19 pandemic created some changes and
accelerated others, like the relocation from big cities to the suburbs as people were spending
more time in their homes and often allowed to work remotely. So, let’s take a look at some
trends going on in Real Estate right now.
- House Hunting Is Done Online
Digitization of data is up more than 2,225% over the past 10 years. The pandemic accelerated
digitization across all sectors. The real estate market is no exception. Due to the pandemic and
the competitive housing market in 2020, some buyers purchased their homes without stepping
foot inside first. Also consider, currently 96% of people start their home search online. So, it is
critical to have a digital/online presence for the property being sold.
Dependent on the property being sold, I have added virtual capabilities to the listing, such as:
- 3D Tours
- Drone videos
- Virtual staging
- Custom website for the property to host virtual capabilities.
One of the companies I work with quotes a bit for marketing properties I am selling or leasing is
Zillow. They allow me to upload photos and virtual tours to make it easier for buyers to browse
listings and get a good feel for the property before they schedule a visit. Zillow and similar
companies provide 3D home tour options.
- People Are Moving from Cities to The Suburbs
The COVID-19 pandemic fueled the migration from major cities to the suburbs. The biggest
metro areas, like New York, San Francisco, and Washington, DC, are seeing some rebound since
the pandemic, however they are still struggling with issues (like homelessness) which are
slowing any return to the cities. Many industry experts predict that the pandemic-fueled shift to
the suburbs will remain through 2025.
Two underlying reasons for the shift are necessity and choice. - Those who cannot afford to stay are moving out of necessity. Many lost their jobs and
couldn’t afford big city prices anymore, and so they moved in search of more affordable
housing options. Low taxes and cheaper housing and rent are helping to fuel the move
for many. - Those with money are relocating by choice. The predominant feature of “middle
neighborhoods” is the single-family home, these areas retain some of the conveniences
of a big city and high walkability scores, shopping, and restaurants.
The shift from cities to suburbs is also driving some of the other real estate trends such as the
increasing popularity of the Sun Belt, rising median home prices, and an overall housing
shortage. - The Sun Belt’s Popularity Continues to Rise
As Americans shift out of big cities, one destination they are moving to is the Sun Belt.
The pandemic reinforced the increasing popularity of the Sun Belt, which is expected to persist
for the foreseeable future. The Sun Belt encompasses 18 southern states from California to
North Carolina. 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. The continued relocation and rising population in the Sun Belt states has bolstered real
estate markets in the region. Austin, Phoenix and Nashville have shown the greatest growth,
according to Zillow. On the other hand, major metropolitan areas, like New York, Philadelphia,
and San Francisco were among the worst real estate markets in the country in 2021. - Single-Family Housing Demand Creates Shortages
The migration from cities to suburbs is resulting in growing buyer demand for single-family
homes. Searches for single-family homes have been at their highest the past few years,
according to Redfin’s chief economist. The pandemic-related demand for houses is
compounded by another coinciding trend: Millennials entering the home ownership phase of
their lives. Millennials looking to purchase their first house or start a family are also spurring
suburban growth.
As a result, single-family housing inventory is the lowest in approximately 40 years.
The market is stabilizing due to higher loan interest rates, new construction becoming available
and other factors which will help to address this problem in the future. - 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 2024 and beyond. Shortly after the start of the pandemic, the
housing market temporarily reversed course, as prices dropped and those looking to sell their
homes reevaluated that decision. However, after a couple of months, prices went back up and
have remained high. In fact, statistics suggest housing prices have increased more than 40% in
the past four years.
High home prices mean homeowners have more equity in their homes. Home equity is the
overall home value minus the amount owed on it. So, as market value increases, home equity
does too. - Rental Property Market Declines
Partly due to the shift of people from cities to suburbs, the rental market for both residential
and commercial properties in big cities was on the decline in 2020. According to Pew Research,
2020 was the first time since the Great Depression that the majority of young adults 18-29 lived
with their parents.
Demand for rental properties has come back in many areas but will continue to be slow 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 or fall behind on their rent.
Investors can also take advantage of commercial properties that went vacant in 2020, such as
hotels and retail buildings, and repurpose them into housing units. Online searches for “real
estate investing” have increased over the past 8 years.
Conclusion
As more people move to the suburbs and look to purchase a home, single-family housing prices
are expected to stay high and supply fairly low into 2024. Signs of their reversal include the
rapid rise in mortgage rates and an increase in housing supply as construction catches up with
demand. It will be interesting to see which of these trends were temporary and which, if any,
are legitimate, long-term trends that are likely to persist over time.