How 2020 Changed Real Estate (and What 2021 Might Look Like)
Despite a booming market, last year was tumultuous for many involved in the real estate industry. Priorities shifted—whether real estate agents changed their marketing strategies, mortgage companies adjusted to a refinance-heavy market, investors altered their strategy, or homeowners faced the prospect of permanent remote work, everyone experienced a shakeup.
Want more articles like this?
Create an account today to get BiggerPocket's best blog articles delivered to your inboxSign up for free
A recent report by Zillow looked to define the stories of 2020. Among the highlights: a booming housing market sparked by record-high demand and prices, millions of newly enabled renters, an urban housing exodus in San Francisco and New York City, and the disproportionate effects of COVID-19 on minorities, women, and young people.
Remote Work Changed Where We Live
Once lockdowns were ordered, businesses scrambled to adjust to the new reality of working from home for a prolonged and unknown period of time. Thus, the advent of widespread remote work revolutionized industries across the world, giving homeowners the ability to choose to live wherever they wanted.
A recent Harris Poll found that over 65% of homeowners would consider moving to a different area if they were allowed to continue remote work permanently. Not surprisingly, most of these homeowners desired to live in popular vacation destinations near the water, in the mountains, or anywhere with a breathtaking view. Pageviews of for-sale listings on Zillow in 20 popular vacation destinations were up nearly 50% from last year.
The results of a changing dynamic in proximity to work opened the door for an estimated 2 million new renters to enter metro markets due to lower demand, making prices more affordable.
Sky-High Demand and a New Way to Shop
For-sale real estate markets exploded in 2020. With some sellers reluctant to list due to uncertainty surrounding the economy and the pandemic, inventory was shorter than usual, causing prices to appreciate rapidly and buyers to scramble. One in five homes sold above list price as homes came off the market at the fastest rate in over two years.
To add more fuel to the fire, the Federal interest rate was decreased to record lows in response to COVID-19, causing the mortgage industry to refinance at record highs and buyers to take advantage of the rates while they could.
Because of the coronavirus threat, listing agents offered more 3D-virtual tours of homes than ever before. Buyers were able to effectively tour homes, get an idea of floor plans through augmented reality, and visit more homes in one day using modern digital tools, which have come to revolutionize the way we shop for real estate. Not only that, but we prevented the further spread of COVID-19 through these tools, making them true lifesavers.
An Urban Exodus—From a Few Choice Areas
It’s been a common belief that urban metros across the nation experienced an “exodus” of sorts—or more specifically, massive numbers of people fleeing cities for the suburbs.
While it’s true that the suburbs grew in 2020, the idea that every city experienced slower growth is false. In fact, the only two metros that had any sort of drop off were the markets of New York City and San Francisco, but they had been softening even before the pandemic struck.
However, data from Zillow do suggest a divergence in the rental market, where rent price slowed down nationwide, but even more in urban markets, allowing for more renters to enter the marketplace in response to lower prices (as mentioned before).
COVID-19’s Uneven Impact
Among all groups, renters caught the brunt of COVID-19. Generally, renters face higher monthly home payments and lower incomes, giving them less financial security. By July, additional emergency unemployment benefits had expired for most, and while eviction protection has remained in effect, renters haven’t been able to benefit from payment forbearance in the same way mortgage holders have.
Other groups, such as women and minorities, were hit with the largest layoffs due to the pandemic. Despite record gains these groups had made in unemployment, wages, and growth before the coronavirus, the trend was reversed following the pandemic’s onset. This led to increased stress on female-headed and minority-owned households, which are now in jeopardy going into 2021.
Young people were also disproportionately affected by layoffs, leading to an estimated 3 million returning home to live with their parents.
Zillow’s Web Traffic Surged
Web traffic to for-sale listings on Zillow surged more than 50% in May and continued to reach new year-over-year highs in the months that followed. As people settled into remote work, for-sale listings on Zillow mentioning a home office in their listing description jumped 10%.
As a result, Zillow expects continued growth into 2021 and another year of rampant markets. Buckle up for another crazy ride.
Join the discussion below.