The real estate market has a habit of being a reflection of its era, a timeless indicator of economic and
social prosperity. For first-time homebuyers or real estate investors looking to make educated business
decisions, understanding the ebbs and flows of the real estate market can be resourceful when choosing
to move forward with a real estate investment or conduct real estate transactions. The real estate and
housing market today looks very different from five years ago, and even more disparate from the
market of the late 20th century. By being able to understand real estate price trends, current and new
property owners can optimize their real estate experiences and work the market to their favor.
In this article, we’ll analyze some of the real estate market trends of 2021, discuss the importance of
being able to anticipate these changes, and identify some potential real estate trends we can anticipate
on the horizon.
A real estate investment can be one of the largest financial choices made in someone’s life. Whether it’s
a first-time purchase or one of many real estate investments, understanding the current real estate
market is crucial for ensuring you’re making the correct real estate decisions. Buying or selling one year
can look drastically different the following year with just a few changes in the economy or local housing
availability. Deciding to buy or sell at the right time plays a huge role in real estate transaction’s success.
Benefits of Real Estate Market Trend Analysis
Some of the benefits of valuing real estate market trend
analysis include, but are not limited to:
- Educated InvestmentsFuture Performance Predictions
- Property Owner Peace & Understanding
- Buyers and Sellers Stay Competitive
- Properly Timed Investments
What Causes Fluctuations in the Real Estate Market?
The real estate market has always shifted with the times. In periods of economic prosperity, real estate
thrives, and in times of economic and social turmoil, the market tends to slow down and experience
challenges. The economy and real estate have always been interconnected, with economic factors
playing one of the most significant roles in causing changes in the housing market. Interest rates also
play a substantial part in the real estate industry’s sensitivity to change. When interest rates are low,
mortgages are less expensive and homebuyer attentiveness and purchasing power increases. Likewise,
when interest rates are high borrowing becomes more expensive and the market tends to slow down.
Government regulations and subsidies can also cause fluctuations within the market. Some parts of the
country have a higher demand due to potential tax credits, subsidies, and deductions that the local
legislation has put in place. This can put a temporary or permanent incentive for homebuyers to have an
interest in those locations. Demographics, the data that describes the composition of a population, can
also play a role within the real estate market. Real estate market trends can be dramatically impacted by
a major shift in the demographic, especially if a certain age or social group is more or less likely to
purchase real estate.
In the wake of COVID-19, the real estate market has changed dramatically. Numerous economic and
social fluctuations have occurred that bring consequences that we continue to experience to this day.
While the many factors that influence the real estate market can make trends difficult to predict, it’s
much easier to interact with the housing market once investors can identify what impacts it the most.
2021 Real Estate Market Trends
A perfect example of real estate’s vulnerability to economic and social factors is the consequences the
market continues to face in response to COVID-19. Since the beginning of 2020, the real estate market
has drastically changed its pace in both positive and challenging ways. The duration of COVID-19’s
consequences on the real estate market is hard to determine, but by being mindful of real estate price
trends and fluctuations in the market we can continue to make educated real estate decisions.
Let’s explore some of the most notable real estate market trends we have identified in the past year.
These real estate trends are not an indication of a negative nor positive market but simply indicate
current economic interests.
Low Interest Rates, High Homebuyer Interest
One of the most notable trends in wake of the pandemic has been low mortgage interest rates. Interest
rates can change daily based on numerous economic factors, and in early 2021 the real estate market
experienced some of the lowest interest rates of all time. These interest rates have caused significant
changes in the real estate market by influencing homebuyer interest, purchasing power, and overall
affordability. With lower interest rates, buyers can afford more expensive homes while keeping their
monthly payment the same, in turn driving prices upwards.
While employment rates were negatively affected in response to COVID-19, as individuals return to their
jobs we’ve noticed a drastic peak in homebuyer interest. This could be an important factor for
homeowners considering placing their home on the market, as they can potentially get a larger return
on their initial investment while also taking advantage of low mortgage interest rates on a new home.
Lower Housing Inventory
As a result of low mortgage interest rates and increased homebuyer interest, the real estate market has
experienced a subsequent lack of supply within the housing industry. This might be confusing because
new homes are being built every day, so why would there be a limit in supply if there is increased
demand? While low mortgage interest rates played a significant role in housing shortages, reduced
construction also played a substantial part in creating this problem.
The pandemic resulted in many construction workers staying at home or getting laid off which
significantly slowed construction processes. This also caused the price of labor to be dramatically
increased and led to a general lack of housing construction. This has caused popular real estate regions
to experience price jumps due to increasingly high demand and low supply.
In addition, there was also a general wariness by property owners to list their homes for sale. Listing
their home for sale would likely require buyer walkthroughs, potentially face-to-face interactions, and
risking exposure to COVID-19. While that sentiment may have changed slightly since the beginning of
the Pandemic, it is still something homeowners consider in today’s market.
Suburban Migration
Any shift in a population’s mindset is likely to impact real estate market trends and we certainly noticed
that with the pandemic’s demand for remote work. At the beginning of the pandemic, countless
employees were told to work from home by their employers, in many cases indefinitely. For those living
in cities for the sake of proximity to their jobs, the pandemic created the perfect excuse for a change of
scenery.
The real estate market has experienced a considerable suburban migration as a result of many city
commuters no longer needing to do travel to their jobs every day. If a person will always be working
from home, it’s natural for the homeowner to want more space. This has resulted in suburban area real
estate prices increasing due to the increase of demand as well as city real estate opportunities being
increasingly available.
Low Mortgage Rates, High Rent Prices
While we’ve taken note of how low mortgage interest rates have created a great opportunity to buy for
interested homeowners, rental properties have experienced many challenges recently. As a result of
widespread unemployment, tenants began to struggle to pay their rent. The CDC stepped in to establish
an eviction moratorium for tenants negatively impacted by the pandemic, leading to many landlords and
rental property owners taking a hit on their rental income.
As a result of these fluctuations within 2020 and 2021, rental prices have drastically increased to help
stabilize from profits lost. They’ve also increased as a result of the housing shortage causing rental
interest to substantially grow at the same time. We anticipate this uptick in rent prices will continue to
trend upward in the future.
Less Retail Space, More Distribution Properties
If there is anything that the pandemic has made more convenient, it’s the luxury of online shopping for
everything and anything consumers need. Ecommerce businesses have thrived due to COVID-19, and
are only projected to grow in popularity over time. This has caused a spike in interest in distribution
property real estate.
We’ve noticed a significant increase in warehousing, fulfillment centers, and distribution buildings for
the past few decades, but construction has majorly picked up pace in recent years. Real estate investors
that are looking to modernize their investments should stay aware of the potential profits gained from
distribution real estate. The drop of interest in visiting brick-and-mortar retail spaces has created an
opportunity for investors to get a higher return on their investment by placing their efforts in
warehousing and fulfillment real estate spaces.
Seller’s Market
When conducting real estate market trend analysis and studying economic trends in general, it’s
common to identify the market’s performance as a “buyer’s market” or a “seller’s market”. A buyer’s
market is characterized by there being more homes and properties on the market than they’re able to
sell, which hasn’t been the case recently. The U.S. is currently experiencing a seller’s market, one
defined by elevated real estate prices and low inventory.
These heightened home prices, high competition for low housing inventory, and low mortgage interest
rates have created the prime seller’s market for current homeowners looking to capitalize on their real
estate investments.
What Real Estate Market Trends are on the Horizon?
The real estate market is constantly changing and during times of economic uncertainty, it can be
especially challenging to predict. COVID-19’s impact on the real estate market continues to display its
effects, but we’ve noticed a slight cool-down in the later part of 2021. For real estate investors looking
to maximize their profits, it’s important to not only understand current real estate market trends but
also how these trends will impact the market down the line.
Let’s explore a few real estate trends we can anticipate in 2022:
Increased Housing Inventory: With the stabilization of construction processes, housing inventory is
projected to increase in the upcoming year, providing more options for interested buyers and a little less
competition when searching for the perfect home.
Housing Prices Will Rise: Due to the lack of supply and increased demand, home prices have increased
and will likely continue to rise due to mortgage interest rates remaining low. Recent trends have caused
prices to increase, but we anticipate prices will at least increase at a slower rate in the next year.
Continued Suburban Migration: Due to increased housing construction and hyper-normalization of
remote work, we will likely continue to see a significant migration toward suburban areas near cities.
Increased Mortgage Interest Rates: While mortgage interest rates have yet to increase in 2021, all good
things end eventually. Economists don’t believe these interest rates will drastically sky-rocket but don’t
foresee them staying at their record lows. This means that interested homebuyers will potentially need
to make higher monthly payments if they choose to wait till interest rates increase.
More Buyer-Friendly Market: While we’re likely to experience a seller’s market for quite some time as
we stabilize from the pandemic, the aforementioned trends we anticipate on the horizon should at least
create a more buyer-friendly environment.
Highlands Investment Group Specializes in Real Estate Market
Trends:
There are countless benefits of being able to identify and predict real estate market trends for
homeowners, real estate investors, or individuals looking to get the most value out of their real estate
transactions. For homeowners looking to sell at the perfect time, Highlands Investment Group can help
expedite the process. Learn more about how Highlands Investment Group can help sell your home
quickly and leverage current real estate market trends to your advantage.
Take advantage of the market when the timing is
right! Get a Cash offer today!