Real Estate Investment Trends to Look Out for in 2021
With over 90% of millionaires in the US generating their wealth through real estate investing, it’s wise and obvious for people to maneuver their skills, time, and capital towards this remunerative sector. However, for some this seems too good to be true — investing passively, no heaps of money required, and becoming a millionaire, are you kidding me? That is, in fact, true and it can be validated by the story of Carl Berg or Dottie Herman who started with nothing but now are real estate moguls with a net worth of over $1.1B and $270M respectively. There are a bunch of stories to support the claim that 34 billionaires have reached that status by investing in real estate.
One might argue that every market has a downfall and although 2020 wasn’t a great year for any sector, real estate investors still managed to excel and generate a considerable amount of profit. It has grown stronger over the years and continues to be so, however, the trends might change just a tad. Here are some of the trends you need to consider for 2021:
Strong Seller’s Market
According to Realtor.com, there’s been a decrease in the active listings by 39% with an increase in the median list price by 11%. These numbers point out that although inventory is lower than in previous years, the prices are increasing steadily and homes are selling faster. This is an ideal situation for sellers who are looking to sell fast for a higher price.
Single and Multifamily Rentals
With work-from-home becoming a norm, people have started to move to the suburbs which increases the demand for single-family and multifamily rentals. This will, however, harm commercial real estate as a lot of companies see work from home as an opportunity to trim their expenses long-term by giving up their office space.
According to the Urban Land Institute, real estate is expected to rebound in 2021 and trend even higher in 2022, as single-family homes will outperform other sectors such as commercial, retail, hotel, and rental. Also, home prices have been projected to grow an average of 4.1% over the next 3 years.
Lower-priced Homes
As the 74 million millennials now have a decent salary and are more likely to buy homes, the demand for lower-priced homes is expected to rise. Another demographic to target is the senior group as New York Times reports have indicated they are planning to stay in their homes longer.
Demand and City Rankings
The demographic shift is changing the city rankings and there has been an increase in suburbs making Sunbelt cities more attractive, according to a report by PWC. Companies are leaning towards business-friendly cities that have witnessed a growing workforce over the past years, Raleigh/Durham, Austin, Nashville, Dallas, and Charlotte — North Carolina being the top 5. This is where smart investors need to be able to pivot their resources
Reduction in Office Space
As work is shifted to primary residences, and second homes due to the ongoing pandemic, workers are moving outside metropolitan areas. It is believed that moving forward, work from home trends will permanently decrease demand for office space. However, office tenants might plan to expand spaces to comply with social distancing measures.
A rise in the demands for industrial properties, data centers, and single-family homes is expected, however, retail and hospitality are projected to see the largest decline.
Video Marketing
Another impact of COVID-19 can be seen in the increasing demand by buyers to virtually visit homes making video marketing and virtual tours a necessity, validation of this is a report by Carrot that pointed around 70% of sellers want to list with an agent who uses video marketing for promotion purposes.
A lot goes into predicting real estate trends for 2021, election results, the continuing impact of COVID-19, economic recession, all this will affect the market in 2021 which is why both real estate investors and sponsors need to have a clear understanding of what to expect moving forward.
