The internet searches for the term “eviction” have increased by 41% in the past decade, a symptom of the COVID-19 pandemic.
Other real estate trends include the shift from dense cities to middle neighborhoods, where there are more affordable multifamily housing options, good public transportation, and high walkability scores. However, these neighborhoods are difficult to regulate and construct.
A shift in the population from the city to the suburbs is also driving other real estate trends.
What is Hyper Supply Phase
When the supply of real estate exceeds the demand for existing units, it is considered to be in the hyper-supply phase. The absorption rates slow down and vacancies rise. Rents also tend to decline in these conditions.
The excess supply may also trigger a recession, which could further slow the economy. Typically, the hyper-supply phase lasts a long time before it is over. Here are some things to look for when entering the hyper supply phase:
In the United States, the macroeconomic indicators are pointing towards a hyper-supply phase, with vacancies at historically high levels and properties on the market for longer than usual.
Different regions are at different points in the cycle at the same time, but smart real estate investors know that there are great opportunities in each phase.
Smart investments always keep one step ahead. But how can one make the most of the current market conditions? Here are some key signs to look for:
The Oversupply Phase
When supply exceeds demand, the market is in a condition known as the oversupply phase. This phase is characterized by increasing vacancy rates and slow rent increases. During this time, investors watch for unsold inventory and prepare themselves for a potential recession.
When vacancy rates increase, prices begin to fall, and new construction slows. The Federal Reserve can lower interest rates, which will encourage landlords to raise rents slowly, making their properties more profitable.
At this point, vacancy rates rise and rents begin to drop. This negative demand leads to losses, especially for landlords. Moreover, price increases caused by hyper-supply may lead the Federal Reserve to raise interest rates, which may hinder new construction and increase financing costs for existing properties.
Aside from these unpleasant consequences, high-interest rates may make it difficult to sell a property, and a high bid-ask spread limits liquidity. Despite low demand, property owners must have deep pockets to survive this oversupply phase.
Millennials Will Be the Largest Buyers in 2022
Millennials are ready to buy a home. But they’re going up against a highly competitive housing market. The median list price of a home climbed 17.2% last year. And with historically low mortgage rates, they may have to pay more to get their dream home. Coronado real estate has tons of beautiful homes you should see.
But some are willing to pay more, and nearly half of them expect to max out their budgets. That means the housing market is poised for continued growth for years. According to Zillow, nearly half of millennials surveyed said they bought a home through an agent.
Those millennials who bought a home through an agent were the most likely to do so. Millennials are now the largest demographic group to purchase a home. But there’s no reason to get your hopes up just yet.
The market is heating up. And the economy is booming. In fact, more millennials than ever will buy a home in the next decade.
The Impact of COVID-19 Pandemic on Housing
The COVID-19 pandemic caused a record-breaking demand for housing, with prices rising at the fastest pace in forty years. The housing market is still unsure when it will cool down, but the two main factors determining house prices are supply and demand.
Demand is determined by the cost of building and the supply chain, while supply is affected by labor. Since the pandemic, there have been fewer construction jobs than before, but demand for homes is still increasing. The COVID-19 pandemic caused the United States to enter a recession, putting millions of Americans out of work and hungry.
It also coincided with a housing boom. With historically low supply, homes for sale went up in price. The soaring demand also drove buyers to bid up prices of homes on the market.
Home prices are now higher than ever, a good sign for homeowners. But a troubling sign for the future of the housing market is the possibility of a prolonged housing slump.
Millennials’ Influence on Size and Type of Housing
Millennials are changing the way we look at housing. While most Millennials don’t need huge, sprawling homes, they do prefer open floor plans and more modern designs. Many of these individuals are balancing demanding careers, freelancing, family planning, and volunteer work.
In addition to their busy lives, millennials are increasingly concerned about the environment. Millennials don’t want a house that will take years to repair or update. They also don’t want to spend their money on a fixer-upper or move-in-ready house.
Millennials are also willing to move to areas with low unemployment and affordable housing. According to millennial housing trends, young families are moving to areas with lower housing costs and more secure jobs.
Two of the most popular millennial-moving cities in 2017 were Des Moines, IA, and Pittsburgh, PA. Both cities have a low cost of living and low unemployment rates. Millennials’ preferences for size and type of housing are important for sellers of real estate.