One of the unintended consequences of the Coronavirus pandemic has been its unexpected effect on the housing market. Initially, many analysts predicted that given record-high unemployment following the lockdown, the housing market would tank. This was the case initially, but the subsequent direction of the real estate market has surprised all but a few.
What was supposed to be a slow season for the property market has turned into a roaring year for people trying to sell their homes. The median sales price for homes has climbed 16% above last year’s, with some parts of the country – the Northeast and West – seeing gains of as much as 21%. At the same time, the number of homes in the market has declined a massive 30%.
The result has been a property market that is largely in favor of sellers. As housing inventory falls lower, prices are climbing higher, and the few available homes are being snapped up so fast that homes are spending an average of six days less on the market than they did at this same time last year. What is even more interesting is this situation may continue for many months.
What is Causing the Spike in Home Prices?
No single event is particularly responsible for the current state of the housing market. Instead, it is the result of the convergence of several factors. In the last decade, the housing market has consistently failed to keep up with demand. But in the wake of the pandemic, other factors have combined with this perennial shortage to create the current market conditions.
The most easily identifiable ones among them are:
- Many people are buying single-family homes in the suburbs to avoid the crowded cities and limit their contact with strangers.
- Families who decided against buying a home last year because of the lockdown are getting back into the market.
- Homeowners are looking for bigger homes to accommodate grandparents, college-age kids who are not on campus, parents who work from home, and children who are schooling virtually.
- Around 4.8 million millennials are turning 30 this year, and many of them are becoming homeowners for the first time.
Should You Buy Real Estate in this Market?
With all that is going on in the property market, is this a good time to buy real estate? Are you better off putting your money into something else and waiting until prices cool off? Or is there an advantage to be gained from getting in the fray with other buyers and trying to lay your hands on one of the available homes, regardless of the higher prices?
The answer is a resounding is yes! You shouldn’t just buy real estate at this time; you should try to buy a lot of it. There is a good reason why we say this.
Why You Should Buy Real Estate in a Seller’s Market
In all the doom and gloom of rising home prices, one important fact is completely overlooked. While this is definitely a seller’s market, it is also overwhelmingly a landlord’s market. This reality creates two clear pathways for savvy investors to make money in this seller’s market.
Become a Landlord
With the highest ratio of renters to homeowners ever, the demand for rental properties is pushing higher and not likely to slow down. Many renters who would normally own their own homes are prevented from doing so by rising home prices. High housing cost makes it more difficult for prospective homeowners to save for the down payment. A lot of these people will continue to rent.
Also, as with all things ruled by the laws of economics, demand pressures on the rental property market are pushing rents upwards. Because good rentals are hard to come by, tenants are not moving as much as they used to, and vacancy rates are lower than they have ever been. This has given landlords the leverage to pick and choose the kinds of renters they want. If you’re unsure how to go about this, research property management websites to find a suitable property manager for yourself. Real Property Management Endeavor would be happy to help you through the entire process and answer any questions you might have.
Flip Rental Properties
Landlords in this seller’s market are dictating the terms for leasing out their homes to tenants. They earn more money from rents and enjoy phenomenal equity growth on their assets due to booming property prices. But even if you have no interest in becoming a landlord, this seller’s market still presents you with one great opportunity.
Somebody has to sell the homes landlords are eventually going to use as rental properties. Anyone who knows how to flip rental properties stands to make a lot of money with this trend. Unlike landlords who use a buy-and-hold strategy, flipping is a short- to medium-term strategy. As long as you can find good deals, you are guaranteed to find a buyer for your homes.
The specific strategy you choose will depend on how good you are at finding low-priced homes and renovating them for a profit. It will also depend on how much risk you are willing to take and, of course, the amount of free time you have. But whatever you do, don’t try to wait out this trend; you might regret it.
Are you looking to invest in real estate this year? Real Property Management Endeavor can help! Contact us online or give us a call at 636-244-5959.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
