Experts predicted a sad situation of post-quarantine in the real estate market, but the numbers suggest otherwise. Let’s take a look at which type of real estate is in demand and what buyers want today.
Probably 2020 is the most emotional year in real estate. Jumps, rapid growth, an unexpected freeze for an indefinite period, lower rates and some confusion of sellers and investors — all this accompanies the current situation on the real estate market. In the midst of a pandemic — April, May 2020 — when the market readings dropped to the crisis level of 2008, experts did not create illusions and laid at least 2–3 years for recovery, but …
Despite the fact that millions of Americans were left without work or with changed pay conditions, most of them decided that now was the right time to invest their savings in real estate. This was facilitated by record low rates on mortgage loans and fear of losing savings held in banks and stocks. The National Association of Realtors has seen an increase in sales figures every month. For example, in August, transactions were completed by 2.4% more than in July 2020. The graph shows how in the most crisis months the number of transactions fell sharply and how indicators are now rising, which have already become higher than in the period before the pandemic.
Experts argue that it is the real estate market that holds the global economy and prevents it from rolling back during the Great Recession.
What is in demand among investors today?
Of course, not all objects are in demand among buyers, therefore the market recovery is uneven.
As before, the economy segment with houses costing less than $ 250,000 makes up 40% of all transactions in August 2020. Homes in the $ 250,000 to $ 1 million segment are up from last year. But most surprisingly, the number of sales of premium homes (valued at $ 1 million) increased by 44% compared to 2019.
Ready-made housing is more popular with investors. This is due to the fact that construction is becoming more expensive every day due to the general increase in prices for materials, and the so-called stocks of new buildings are slowly but surely drying up. And with such a growth rate in demand, housing under construction will last for another 3.3 months, according to preliminary estimates of experts, which means that the price of such objects will continue to grow.
By the way, prices for secondary housing also do not fall, but rather the opposite. But by lowering mortgage rates, the buyer ultimately acquires real estate at pre-crisis prices.
Thanks to the pandemic and a series of economic improvements in the form of tax cuts, Florida has become a popular and favorite destination for northerners. People began to give up apartments in New York for their own home with a large kitchen for family evenings and their own personal gyms. Over the past year, the state’s population has increased by 343,000. At the beginning of the quarantine, people tried to rent a cozy house in order to sit out in comfortable conditions and protect themselves and their families, but according to local experts, most of these families ended up buying rented real estate.
Until now, in Florida, 80% of the demand is for single-family homes. People are afraid of the second wave of the pandemic and want to spend it in a place where the weather is always good.
Realtors try to find the ideal home for their clients and take into account the needs, for example, in children’s leisure near the house, or a bar so that a young couple can relax. The cost of housing depends on many factors, but the average price for a five-bedroom home starts at $ 1.1 million. In Delray Beach, Parkland or Coral Springs, you can find deals ranging from $ 600,000 to $ 700,000 for a home with good schools and restaurants nearby.
On the contrary, in Texas, the growth of the housing market slowed down in August. This is due to the fact that the supply cannot meet the sharply increased demand for housing. The situation with houses worth up to $ 300,000 is especially acute. Over the past month, home purchase rates fell by 14.6%, but still remain 3.4% more than last year.
Home prices have increased by 10% on average.
At the same time, experts note that, for example, in Dallas, there is no rush to buy housing. It is there that the number of offers covers the amount of demand. And if you are looking to buy a home in Texas, then you should take a closer look at this offer, since key indicators of the real estate market promise a decrease in home prices in the next 12 months by 2.4%.
Dallas is a place where, despite everything, there is a constant increase in population and job offers, which means a stable demand for rental housing. Currently, the average rental price is around $ 214 per foot.
The demand for single-family homes in California increased 14.6% year over year. At the same time, premium class houses are gaining popularity. So, in August, the average cost of a house sold was $ 706,900. Shoppers choose the coastline and the San Francisco Bay Area. The demand there increased by 10%.
If we talk about the general increase in prices, then over the past six months the average home price across the state has increased by 5% to $ 626,170. Experts predict a further increase of 5% by 2021.
What awaits us in the near future?
The overall demand for real estate will continue to grow, as an increase in mortgage rates is not expected in the coming year. It will remain at the same level of about 3%. By the end of 2020, the real estate market will stabilize — supply and demand will equalize, which means that prices will stop rising, at least not at such a rate.
What will happen if the second wave of the pandemic comes? It is difficult to answer this question. Some experts argue that with mortgage rates remaining unchanged and working demand recovering quickly, and taking into account the experience gained in the first wave, the real estate market will quickly return to its indicators. Others argue that the consequences of the second wave will be more devastating and this is due not only to the real estate market, but to the decline of the global economy in general.
Dmitry Tsyplakov, CPO of Fincase