- Demand will continue to outstrip supply by a significant amount.
Despite the fact that millions of people are unemployed or under-employed due to COVID-19, the demand for houses in many areas is surging. And while first homes and mid-level homes are the most coveted, some luxury homes are also generating ferocious bidding wars — especially if they happen to be in Palm Beach or other locations that are fast becoming havens for individuals fleeing densely populated pandemic hot spots.
“What’s behind the growing demand for housing is two things: a lack of overall inventory, and historically low interest rates that are convincing many individuals, families and investors that now is the time to act, because once the economy starts heating up then interest rates are going to rise, and they may never be this low again in our lifetime,” commented Eduard Shapshovich, who prior to becoming a real estate investor was a city planner. “Take for example a 30-year fixed mortgage at 2.85%, and a five-year term. If a family borrows $300,000 to purchase a home, their total outlay over the full amortization period is just under $445,675. Now if the same calculation is done with a 3.75% mortgage rate, their total outlay over the full amortization period is just under $498,400. That is a difference of nearly $53,000 for the exact same home, and over the exact same time period. And who is to say that 3.75% will even be offered five, ten, or twenty years from now? Back in 2010 after the Great Recession ended and the recovery was underway, the average rate for a 30-year fixed mortgage was 4.86%.”
2. The work-from-home movement will lead to more relocations.
When the pandemic erupted, for some people the only silver lining was that they no longer had to ensure a tedious commute. However, about a year later, many of these home-bound professionals are looking for additional space. What does all of this mean for the spring 2021 housing market? It’s simple: we can expect this group to change addresses as they seek more work-friendly spaces.
“Sellers who have fully-functional and finished home offices, or who have spaces that can be renovated to serve as a home office, are really hitting the jackpot right now because those types of properties are very coveted at the moment, and will continue to be throughout 2021,” commented Eduard Shapshovich. “What’s more, some companies have already decided to make remote working permanent, because it’s more cost effective and supports agility and scalability.”
3. The condo market will start to heat up again.
Just as the temperatures outside will start to heat up through spring, the condo market will heat up again after a difficult 2020. There are a couple of reasons for this. The first is that some buyers are priced out of larger single-family homes in the suburbs, and so are refocusing once again on condos for their relative affordability. Furthermore, the promise of a COVID-19 vaccine bodes well for those who have been wary of having to navigate crowded lobbies, elevators, and hallways.
4. “Staycation” homes will be coveted.
Whether they wanted to or not, millions of families across the U.S. in 2020 took a “staycation”. As such, many will be looking for a new home that features more indoor and outdoor space for gatherings with family and friends.
“There is growing interest in homes that have a kitchen that is seamlessly connected with the backyard, so that people can weave in and out depending on the occasion, mood or weather” commented Eduard Shapshovich. “There is also increasing demand for homes that have fully-finished basements that can be used as a party room, a games room, or some other recreational and enjoyable way. Of course, families will still head out on vacations, but they will also have the option of staying at home or entertaining at home — not just because it’s cheaper, but because it’s convenient and fun.”
The Bottom Line
Nobody can predict the future. However, it is a very safe bet that these astute predictions shared by Eduard Shapshovich will dominate the real estate story this spring. As always, time will tell.