The State of the US Housing Market Entering 2021 With Real Estate Professional Jonathan Weiss
Reasons to be Optimistic About Residential Real Estate in the Coming Months
As the new year dawns, American real estate markets continue to react to stay-at-home orders, localized lockdowns, and the transmission, morbidity, and mortality rates linked to COVID-19. Simultaneously, markets continue to react to historically-low mortgage and interest rates, sparse inventory, and high demand. Without question, the last twelve months have been a roller-coaster ride for real estate. Some trends that were reasonably steady for years have been upended and reversed. Meanwhile, some trends that were already on the ascension have accelerated. But overall, and perhaps counter-intuitively, with only a few exceptions, there is a lot of reason for optimism in the US housing market as 2021 begins. Jonny Weiss outlines several reasons to be optimistic about the residential real estate market this year.
Large Metropolitan Markets
First, falling firmly into the category of established trends that have been upended and reversed, major US metropolitan housing markets have suffered the most during the pandemic, posting across-the-board declines in rent and home prices after a decades-long run of uninterrupted gains. It is a safe bet that until wide-scale vaccination of the general public has been implemented (which would run through the first two or three quarters of 2021, if state governments adhere to their projected timelines) large metropolitan real estate markets such as New York, Boston, San Francisco, and Los Angeles will continue on a downward trajectory. This is largely due to the fact that because these areas boast extremely high population densities, avoiding exposure to COVID-19 can prove difficult for those who choose to live in them. As a consequence, more people are moving out of the biggest, densest cities in America than are moving in, and real estate prices have dropped accordingly.
Secondary Urban Markets
More than picking up the slack, however, are secondary urban real estate markets. Illustrating this point, topping the Forbes list of hottest housing markets in America in 2020 is Boise, Idaho, followed by two mid-sized cities in Utah, and then Tulsa, Oklahoma. It is believed that the lower population densities inherent to such places, combined with the now-prevalent ‘work-from-home’ phenomenon that has rendered the need to maintain a residence near a place of work moot for many homeowners, explains their appeal. A desire by many people to live in a warm climate may also be a factor, as over half of the cities on that list are located in southern or desert states, and it is well-established at this point that increased sunlight and heat greatly reduce transmission of the coronavirus. At any rate, the trend of American homeowners seeking to purchase property in secondary urban markets had been gathering steam for almost a decade before 2020, and was merely accelerated — not created — by the pandemic. There is absolutely no indication that this trend will slow down in the coming year.
According to Jonny Weiss, suburban markets, ever-resilient, exploded in value during 2020, powered in large part by a massive uptick in the worth of single-family homes. These highly-desirable properties rarely lose value (not counting the incredibly avoidable mortgage crisis of 2007–2009, of course), but skyrocketing recent demand for detached homes with yards in safe neighborhoods has touched off something of a bidding war for almost any single-family home put on the market. Closing prices are way up all over the country. Contributing to this suburban surge are younger Millennials buying their first homes, many viewing COVID-19 as an impetus to exit rental situations in urban areas and relocate to places much like the ones they grew up in to start families of their own. There is also some interesting data pointing to older Millennials forming a higher demographic share of the trade-up housing market. Regarding nearly all suburban real estate in the United States, experts predict these trends will likely carry on for quite some time, possibly into 2022, before mortgage and interest rates inevitably begin to creep upward as the economy in general recovers from the current COVID slump.
Jonathan Weiss claims that the overall state of the US housing market entering 2021 is remarkably robust. The current consensus across the industry is that large metropolitan markets will continue to decline while smaller secondary urban markets will remain strong. In fact, with the exception of only the largest, most densely populated cities, almost everywhere else in the country has experienced a rapid appreciation in real estate prices. Suburban areas, the stalwart performers of the pandemic era, will almost certainly keep doing well in 2021, bolstered by impressively consistent demand for single-family dwellings and by Millennials seeking to enter the housing market for the first time. Small towns and rural markets are thriving, too. Considering how other sectors of the economy are faring at present, the situation in the housing market is nothing short of remarkable. Indeed, harkening back to the pandemic’s outset in late winter/early spring of last year, it would be near-impossible to dredge up an economist or a real estate expert who would have predicted such a cheery state of affairs.