Investing in real estate is a great idea at the best of times. During a crisis? Even better. And according to Cheryl Young, senior economist at real estate platform Zillow, “the residential market is on fire right now in most of the country.”
Investing in real estate
In any economic crisis, every market takes a hit, real estate isn’t exempt. The difference however, between investing in real estate and investing in the stock market, is that when you invest in property, you’re investing in something tangible, something you can actually touch.
As simple as that sounds, it can be incredibly comforting, especially during these turbulent, unprecedented times.
Way back in early 2020, at the beginning of the pandemic, the real estate market took a tumble. Nowhere was the drop more apparent than in sales. At the start of the crisis, house sales tanked with experts predicting a significant drop in house prices to match. But the drop never came. If anything, they grew.
Yes, the real estate market hasn’t returned to pre-crisis levels, but it’s on the up. And the house price sales that were anticipated to fall? Well, they’re growing too. And while that might not sound like a great reason to invest in real estate now, COVID-19 has changed the housing market forever.
Despite house prices failing to fall, mortgage rates are at an historical low, meaning the cost of borrowing is cheap. And so with the mass COVID migration away from expensive, densely packed urban areas, there’s never been a better time to invest in real estate, in places you might not have considered previously.
You might just snare yourself a bargain in the process.
Why 2021 will be a good time to buy a house
Residential housing is one of the most promising sectors in 2021 for investors to sink their cash into. More specifically, suburban residential housing. That is, housing with outdoor space, with an office, with room for a family and a business.
With no end insight for the ongoing pandemic, people are finding their current homes just aren’t fit for purpose. This new way of living: WFH, exercising, teaching, living, cooking, socializing, it simply doesn’t work with pre-pandemic homes – houses that were purchased because of their proximity to theaters and nightlife, where outdoor space wasn’t a requirement because who spent the majority of their day cooped up at home?
Now, according to realtor.com’s consumer surveys, home buyers are on the hunt for property based in quiet neighborhoods, access to green space, home offices, modern kitchens. Property traits that were once reserved for young families and retirees are now on the priority list for most buyers.
Granted, WFH isn’t going to be with us forever, and life will slowly return to ‘normal’ as the vaccine program gets underway. But, for better or worse, COVID has changed the way people work and as a result, it’s changed what home buyers prioritize.
With companies requiring employees to work remotely for the foreseeable, and with many companies changing their policies for good, why purchase the expensive, city centre property in the cold north, when you can relocate to warmer, sunnier climes, down south, where the weather encourages outdoor living? For example.
Do you really need to be within easy reach of the shops when everything you want can be purchased online? What’s the point of living close to restaurants, bars and other amenities, when the chances of them opening up again, are slim to none?
The question, therefore, is where should investors put their money?
Where to invest in real estate
With everything still up in the air, the answer to how and where Americans will choose to live their lives, post-pandemic, will play a central role in determining which cities will experience demand for real estate – which states will see a surge in population and which ones will be left stagnating.
Those large cities that have been enjoying gentrification of late, such as Washington D.C and NYC, could see a slow down or even a reverse of the investment that’s been ploughed into them. Why would you choose to live cheek by jowl with your neighbours in an expensive, small property, when you don’t have to?
This is creating opportunity for smaller cities and less popular states that were once written off as not being big enough, not popular enough, not cultural enough, lacking in sophistication. Those parts of the country that are warm, less populated and offer a better quality of living. With better access to education, less crowded schools, better hospitals, more open spaces.
Those are the places Americans are now seeking out. The great COVID-19 migration is well and truly underway. So where are people looking?
Hot real estate markets
With the requirement to live close to where you work no longer on the table, a vast number of Americans are seizing the opportunity to live a life where they want to live, rather than where they have to live. Americans are moving faster now, than they have ever done.
According to realtor.com, America’s hottest real estate markets are outside the big urban centres, with places such as Melrose, MA, Portland, ME, Hudson, NH, Worcester, MA, and Rochester, NY, topping the list. Real estate platform Zillow paints a similar picture. Their data indicates that three of America’s hottest real estate markets are in Ohio: Columbus, Cincinnati, and Dayton.
So where’s notably absent from the hottest real estate lists? Well, those places that have traditionally been high priced, high taxes and now, highly locked down. Urban locations such as California and the Pacific Northwest, NYC, Honolulu and Philadelphia.
America, right now, truly is your oyster. The question is, where will you end up?