The real estate market was thrown into a tumultuous state when the Covid-19 pandemic struck. Between people losing work and being afraid or unable to move, the year in lockdown made a significant impact on the market.
Even as life regains a sense of normalcy, there are several factors that will continue to impact housing prices, buyer behavior and the real estate market in general. Here, 11 members of Forbes Real Estate Council share their expert predictions for the future of the real estate market through the end of 2021 and into 2022.
1. Less Urgency To Buy Residential Real Estate
Looking ahead in residential real estate, I see less urgency to buy as more people get outside of their homes and are drawn back to other activities. Robust cities will remain very strong and prices should stabilize for the short term as more inventory emerges. The exodus from metropolitan areas should subside and second home markets are likely to experience a softening. – Laura Gottesman, Gottesman Residential Real Estate
2. The Workforce Will Face Homebuying Challenges
The affordable housing crisis is facing a perfect storm with the housing shortage and growing barriers to entry with higher credit scores, deposits and income requirements for renters. God forbid you actually have an eviction in your past. As a result, our workforce will have more challenges finding a place to live. So the question now becomes: What are policy makers actually going to do about it? – Atticus LeBlanc, PadSplit
3. The Market Will Appreciate Significantly
Though “crash” articles get clicks, real estate will appreciate at an above-average rate through late 2021 for three reasons–scarcity, utility and demand. Scarcity: there is a shortage of 6.8 million housing units. Utility: the home is now the center of the remote workers’ world by being both the office and gym. Demand: Millennials are America’s largest generation, in their prime home-buying years. – Keith Weinhold, Get Rich Education
4. There Will Be Fewer Showings And Offers
Sales continued to increase over last year and prices remain stable. After the halfway point of the year, unlike shoes and watches, many people do not buy more than one home at a time, so I expect to see fewer showings, fewer offers and less aggressive offers. In most markets, sellers overcorrected on their pricing months ago, so the over asking price craziness has already settled down a bit. – Joshua Cooley, Keller Williams
5. Demand For Multifamily Homes Will Increase
Since single-family home supply is constrained and prices are up, the demand for multifamily will increase in the second part of 2021. As a result, multifamily vacancies will go down and rents will increase. We’ve seen this trend since Covid started, in early 2020, and this trend has been continuing in full force and will continue in the next 12-18 months. – Ellie Perlman, Blue Lake Capital LLC
6. Housing Prices Will Become Unaffordable
Simply put, there is a lack of inventory in the affordable housing space and all the buyers that want to buy can only afford those types of properties. Builders are building houses that the average American cannot afford. Inventory is continuously shrinking and there are more buyers than ever for that product. Housing will continue to rise until it becomes completely unaffordable for the public. – Alex Hemani, ALNA Properties
7. The Market Will Either Cool Or Have New Investors
Mortgage rates are headed higher as inflation is likely to be more troublesome and have greater endurance instead of being “transitory” as many economists predict. Depending on where mortgage rates end up, it will either cool the housing market by the end of the year or we will have a plethora of new investors buying homes and squeezing out even more first-time buyers. Low inventory is here to stay. – Kevin Hawkins, WAV Group, Inc.
8. The Market Is Shifting Into A More Balanced State
Inventory seems to be picking up, and buyers who have been suffering from fatigue have more options and more buying leverage than we have seen in the past. I’m seeing a shift that ultimately may result in a more balanced market in the latter half of the year. If you are a flipper, I would recommend giving yourself a little cushion on the resale price to accommodate the shift. – Courtney Poulos, ACME Real Estate
9. The Use Of Technology Will Drive Value Of Assets
I predict that developers and owners will increase their interest in using technology to drive the value of their assets. It is going to be about looking for more ways to use technology to drive positive financial and climate outcomes. – Bradford Dockser, Green Generation Solutions, LLC
10. Sublease Space Will Continue To Increase
On the commercial office space front, we are anticipating further softening driven by weakening demand as the shift to a more hybrid workforce continues, highlighting the ongoing transformation in how people work. Sublease space will continue to increase, tenant concessions will continue to rise and rates will continue to weaken and fall. We anticipate this weakness to accelerate going forward. – Jonathan Keyser, Keyser
11. Rental Market Will Keep Growing
We’re becoming a renter nation, and this trend will keep growing into 2022. Housing prices have become so inflated that the percentage of people who can afford a home has already dropped off and will continue to do so. Much like with the last housing crisis, rental properties will meet the demand for housing. We simply haven’t been building enough new inventory to keep up with demand. – Ken McElroy, MC Companies