Real Estate News & Commentary

Housing Markets Post-COVID: Which Ones Win? Which Lose?

Expertise: Coronavirus Updates
17 Articles Written
Aerial view of of a residential neighborhood in Hawthorne, in Los Angeles, CA

An essential rule in real estate investing never wavers: location, location, location.

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When looking for a property, dialing in on where people want and need rentals is key. Look at population and job growth. Find out where there is a limited supply of houses and great demand. This will ensure you'll find tenants. It also usually means property values will appreciate over time.

And now, COVID-19 is creating a new variable. Based on prices being sky-high in many markets—with a correction looming—some areas of the United States remain more vulnerable than others.

Read on for an overview of what’s going on in several areas of the country. Along the way, we’ll discuss how to analyze markets so that you can maximize your real estate investments once the COVID-19 dust settles.

How to Identify Housing Markets That Will Remain Strong Post-Pandemic

Where I live in Austin, Texas, prices continue to rise. There is a bidding war on almost any property for sale in the city. Even though it is clear that millions across the country have a mortgage in forbearance, the demand in Austin seems so high that the city may come out unscathed when the pandemic is in the rearview mirror.

Like Austin, other areas have continued to see population increases over the past few months. There has been a mass exodus from several once-thriving cities, in fact. According to the USPS, over 15.9 million people moved in the first six months of the pandemic. This is excellent information in terms of understanding significant shifts in supply and demand in the housing market.

Travel concept with red pushpin

Take Business Insider, which cited nine states where the population dramatically increased over the past six months: North Carolina, Oregon, Arizona, Kentucky, Maine, South Carolina, Delaware, New Mexico, and Idaho.

Meanwhile, per ATTOM Data Solutions, the six counties least at risk of suffering a significant downturn are in densely populated areas. The reason is simple: Where there are people, there is a need for housing. The counties identified by ATTOM include Tarrant County (Fort Worth), Texas; Travis County (Austin), Texas; Marion County (Indianapolis), Indiana; and Denver and Arapahoe counties in Colorado.

While buying in these areas is enticing, finding deals—especially cash-flowing properties—is very competitive. In other words, you can most certainly find a tenant, but after you pay top dollar in a bidding war for the house, the rent may not cover your mortgage and expenses for the property.

If you cannot afford to cover a few hundred or more out of pocket every month, you may need to go further outside these central areas and into the suburbs—or even move to another state altogether.

Which Real Estate Markets Will Be Hit Hardest by COVID-19?

As should be expected, dips are likely to occur by city and county—not by states as a whole—per ATTOM Data Solutions. However, Connecticut, New York, New Jersey, Pennsylvania, Maryland, and Delaware made up for 32 of the 50 counties that were most vulnerable to the pandemic’s economic impact in the third quarter.

ATTOM identified five suburban counties in the New York City metropolitan area, four around Washington, D.C., four around Philadelphia, four around Baltimore, and seven of Connecticut’s eight counties.

In addition, USA Today has also called out 30 cities on the verge of a COVID-driven housing crisis. Examples include Las Vegas; New Orleans; Bakersfield, California; Los Angeles; and Miami.

“Areas where housing costs are high relative to income and where recent spikes in demand may have created local housing price bubbles may be at a greater risk of a COVID-19-driven crisis, as would areas that were already struggling prior to the coronavirus outbreak,” USA Today noted.

Another indication of areas that will be affected heavily: those where the economy is relatively dependent on one industry or where a state has a number of small companies. Many businesses have had to close their doors permanently, and entire metro regions may be impacted as a result.

The lesson of an undiversified economy was witnessed in Detroit, coined the "Motor City," during the car industry crash that devastated its economy in 2008. The downfall, coupled with a nationwide recession, tanked the city's housing market to the point where homes were unbelievably inexpensive for years to come.

In fact, many investors and homeowners steered clear of Detroit for a time. But in the past few years, the Detroit real estate market turned around—and those who got in early earned a great return.

How Long Will It Take for Markets to Recover Post-Coronavirus?

Too many vacancies inevitably drive rent prices down. In fact, millions were rendered unemployed overnight when the Big Apple shut down. And as COVID-19 numbers continue to rise, housing issues will continue to compound.

Landlords will likely be forced to charge less for rents to stay competitive. Owners will realize having some rent is better than none at all!

Strangely, you can get a deal in Manhattan right now, depending upon the area. According to Forbes, Manhattan prices have dropped 5.3% year over year, per data from Redfin. However, not all areas have been affected evenly.

For instance, since last year, home prices are down 56.5% on the Lower East Side, 34.8% in Tribeca, and 36.3% in the Financial District—its neighbor to the south. But if you head north to Murray Hill on the East River, home prices are up 47.2%.

Yes, many have left Manhattan. But it is still considered one of the world’s greatest places to live, according to Nordada. And as such, prices will likely increase 6% over the next 12 months.

COVID-19 Forecast: What’s Next for Housing?

"While it's unlikely that we'll see a return to the historically high levels of foreclosure activity we saw during the Great Recession, it's a near-certainty that the number of defaults will increase once the foreclosure moratoria have been lifted and the CARES Act forbearance program expires," said Rick Sharga, executive vice president of RealtyTrac. "It's also likely that foreclosures will be concentrated in markets where there's a dual-trigger—for example, stubbornly high unemployment rates and homeowners who are underwater on their loans."

This pandemic is far from over. Cases are on the rise, and there is still no date a vaccination will be available to the public. Forbearance upticks are in full swing, and no one knows precisely how the next chapters will look.

However, seasoned investors can continue to research and anticipate the variables that will drive real estate prices in the next few years before making their next move—especially if your goal is to make a profit off the state of flux we’re in. And if it all seems too overwhelming and confusing, return to the basic real estate principle that never fails: location, location, location.

Predictions? Warnings?

Share your thoughts below!

Tamar Hermes is a full-time real estate investor and educator. After building successful businesses in the retail and entertainment industries, she turned her attention to real estate with a missio...
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    Donna Chicca
    Replied 13 days ago
    Tamar, This is a very informative article. I am a retired teacher living in Bakersfield, CA. I desire to buy my first investment piece of property soon and would like to follow in your footsteps to be a full time real estate investor. Thank you for taking the time to help educate me. When do you think Bakersfield will see a drop in housing prices? Donna Chicca
    Tamar Hermes from Los Angeles, CA
    Replied 13 days ago
    @Donna Chicca I wish I had a crystal ball to know about Bakersfield. I think we will start to see some foreclosures around Q1 or Q2 of next year. Unfortunately, some people may not be able to manage the moratorium extension in California and will decide to sell. If you are focused on Bakersfield or a particular neighborhood, start sending out letters and talk to neighbors. You may be able to catch an off-market deal. Also, if a property will cash flow, which may still be possible in parts of Bakersfield, you may pick up something and ride the wave knowing the tenants will cover the rent. CA is a tricky market these days. I recently sold almost everything in LA. and opted for more landlord-friendly states to own property.
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied 13 days ago
    Location, location, location...and internet. I invest in an old Gold Rush area in CA. The main town on the freeway has a population of @ 7,500 (with decent internet, and even fiber avail --for a price). Houses are selling in days to a couple weeks unless they are wildly over-priced or are unfinanceable. SFR in the "large" town with internet (and a Walmart & Starbucks) have been selling for about $30-50k more than similar in smaller (pop 700) towns nearby with poor internet (also $20-50k more than the same homes 9 months ago). Large, nice, move-in ready homes are contingent in days.
    Katie Rogers from Santa Barbara, California
    Replied 4 days ago
    Sounds like Sonora, CA.
    Faye Claire
    Replied 13 days ago
    The hwy 4 corridor is booming with city folk leaving but expecting to still have to commute back every now and then. The suburbs are booming... but for how long?!
    Tamar Hermes from Los Angeles, CA
    Replied 13 days ago
    @Deanna Opgenort Thanks for sharing! We all can find our niche!! What a clever way to dissect the opportunities in CA!
    Tamar Hermes from Los Angeles, CA
    Replied 12 days ago
    @deanna Opgenort Thanks so much!
    Michael Casile
    Replied 13 days ago
    The unemployment situation that these heinous lockdowns are causing is going to have a big impact ... but that would be in a free market. I think it is crucial to see what government does as they continue to believe that they can over-ride the laws of economics (which ... long term ... is as likely as them changing the laws of physics). Bottom line, unemployed people still need a roof over their head. They may continue to disallow evictions for non-payment of rent ... this will squeeze us real estate investors ... and have an unpredictable affect on the market. If foreclosures are allowed but evictions are not ... then housing will drop in price ... and rents likely as well. It will be crucial to see what Big Brother does here ... I'm not a big fan of Big Brother ... but I do know that I am somewhat tied to the whim of Big Brother.
    Katie Rogers from Santa Barbara, California
    Replied 4 days ago
    It does not appear that government thinks they can override "the laws or" economics. Health of the populace goes hand-in-hand with a strong economy. They are not independent.
    Tamar Hermes from Los Angeles, CA
    Replied 13 days ago
    @Michael Casile, I agree with your sentiment. These are such hard times. The lockdown is devastating for businesses, and there needs to be a solution that protects people and allows everyone to get back to work. Some people will definitely profit during these times, and as investors, it is what we do. I personally am wearing a mask, refraining from any events with too many people, and carrying on with business and life. Oh, and I left Los Angeles for Austin!
    David Stern Investor from Chandler, AZ
    Replied 13 days ago
    Great article! However I'm confused, what exactly is a housing crisis? I'm a cash investor, some buy and hold but mostly flipping in the Phoenix area. If "crisis" means price drop that's great for buying! Here, seems the real crisis is actually finding a property and not having a biding war... guess the definition varies on location? Thank you for any replies!
    Tamar Hermes from Los Angeles, CA
    Replied 13 days ago
    @David Stern Thanks for reading. Yes, Phoenix is going strong! I am invested in a multi-family there and the vacancy is solid. We may see some shifts in Q1-Q2 across the country, but when Phoenix sees a drop is hard to say. I just signed on a deal in Tempe, AZ last week. :)
    Christopher Smith Investor from brentwood, california
    Replied 13 days ago
    Always amazes me how people start frenzy buying when prices are already very high and climbing precipitously. The herd mentality gone totally wild again, it always proves to be utterly irresistible to the clueless sheep. I bought in heavily during the 2010 to 2013 time frame (Ca market), and a couple more picks ups ending in 2016 (Oh market). Prices were at the very bottom of the barrel then, desperation was on everyone's face, the sheep wouldn't touch real estate with a 10 foot pole, banks weren't lending to anyone, god it was total f'ing heaven, I was like the only kid turned loose in the proverbial Candy store, shooting fish in a barrel. Oh how the times they have a changed.
    Tamar Hermes from Los Angeles, CA
    Replied 13 days ago
    @Chirstopher Smith Yes, the times have changed and will change again. It sounds like you will be ready!
    Joseph M. Rental Property Investor from Sacramento Area, CA
    Replied 13 days ago
    @Christopher Smith: I 100% agree with you. In this market, there are deals but you really have to be on your A-game. Right now, while I am looking for my 4th deal this year, I am aggressively hoarding more cash each month. I am waiting for the "proverbial Candy store". Newbie's, all I can say is take your time and you should not MAKE a deal work. My everyone have a Happy Thanksgiving.
    Mary D. Rental Property Investor from Salem, NH
    Replied 13 days ago
    Good information Tamar! It is somewhat difficult to navigate through this. My personal thoughts are to stay close to home. I live in NH. So close to Boston & Maine which seems to be a place to keep an eye on. Here in NH many towns & counties near me are crazy prices & inventory is low. Just means more marketing & networking to find deals.
    Tamar Hermes from Los Angeles, CA
    Replied 13 days ago
    @Mary D. Yes, I like investing close to home. One of the reasons I wanted to get out of California and headed for Austin. It is great that you keep looking till the right deal presents itself!
    Stephanie Hill
    Replied 13 days ago
    I’m a real estate agent in the Washington, D.C. area. Most of the people here work in the federal government or industries directly supported by it. Housing has been fairly high for quite a while. It’s gotten even more competitive since the pandemic. Can you please explain why you think this area will be “hard hit” after the pandemic ends? Not sure I see that on the horizon.
    Tamar Hermes from Los Angeles, CA
    Replied 13 days ago
    @Stephanie Hill Hi Stephanie, I judge by the research. Look more closely at ATTOMS study. There are lots of companies that dig deep into research and spend a lot of money to determine what markets are doing. If people are moving out of cities or if jobs are scarce, it will definitely affect the housing prices. Then again, if you live in the city and find opportunities where the numbers make sense, trust your instincts.
    Russell Brazil Real Estate Agent from Rockville, MD
    Replied 13 days ago
    12% of the workforce in DC are Federal Employees. It is virtually tied with private sector legal (11%) and private sector tech workers (11%). Its kind of a misnomer that the area is dependent on the Federal Govt. Yes it absolutely helps, but 88% of the work force is employed in other sectors.
    Tamar Hermes from Los Angeles, CA
    Replied 13 days ago
    @Russell Brazil Yes, and as we know the government has no problem paying bills as they have an endless supply via their printing press. :(
    Vic Poskus
    Replied 13 days ago
    landlords are working - tenants "on moratorium"
    Tamar Hermes from Los Angeles, CA
    Replied 13 days ago
    @Vic Poskus It is a challenging time!
    David Seifert
    Replied 13 days ago
    I was in real estate in Las Vegas during the Max 43,000 homes on the market all the way down to under 7000 in the 07-09 yrs. when I see foreclosures I see opportunities. More for less and a higher rent demand meaning more monthly positives. If I was still selling and in NYC I would be in contact with my foreign investors for a positive 5 yr hold and resale minimum I tended to advise investor and those buyers who bought homes to live in. As for so many loons screaming about the eviction moratoriums, they should get to calling their republican members in state and federal levels as they are why owners aren’t being treated as fairly. Life is not easy, if you invest in real estate you should have money to cover costs in a worst case scenario or you shouldn’t be in it, just as buyers shouldn’t buy a home if they don’t have a minimum of 6 month housing and living costs saved up.
    Kyle Mccaw Property Manager from Keller, TX
    Replied 12 days ago
    Great article. Thank you for posting this. As a property manger in North Texas, I can affirm that Tarrant county (Fort Worth) is doing just fine. I don't want to say COVID-19 is a non-event but it seems that way. We manage around 700 single family homes and our late pays percentage is no different than 2019. Every day it seems that an out of state company is relocating to Dallas-Fort Worth.
    Tamar Hermes from Los Angeles, CA
    Replied 12 days ago
    @Kyle Mccaw Yes, I like Texas! That's why I moved to Austin. I'm current;y looking for a Multi-family 16+ units in San Antonio but would be open to the Fort-Worth area. Would you have any leads for me there? Nothing like a great property manager! My favorite!
    Kyle Mccaw Property Manager from Keller, TX
    Replied 10 days ago
    Nothing in my circle at this time. We would love to work with you in the future. @Joe Funari is there anything you know of?
    John Murray from Portland, Oregon
    Replied 12 days ago
    Metro areas with a housing shortage will always come out on top for wealth building. Metro areas with high property taxes will not do as well as metro areas with low property taxes given the same housing availability. To attract large scale business ventures local government has a complex matrix to analyze and implement. Most are incompetent. Looking to metro areas that have little big city problems is difficult, this is the key that will spell success. With that said Camden NJ would be a great example of a metro area that would not yield much fruit. Some other factors include state income tax as well as sales tax. Covid, political climate and livability also play a role but the main factors are housing availability and tax structure.
    Tamar Hermes from Los Angeles, CA
    Replied 12 days ago
    @John Murray Great comments!
    Michael P. Lindekugel Real Estate Broker from Seattle, WA
    Replied 11 days ago
    let's not forget SF. the commercial market, condo market, rental market cratered. sky high inventory for sale and lease.
    Tamar Hermes from Los Angeles, CA
    Replied 10 days ago
    @Michael P. Lindekugel Yes, Michael! So many opportunities!
    Jadie May
    Replied 10 days ago
    I was disappointed with this article. It is extremely unclear. Nowhere in the article do I see a clear statement of where to buy a house for investment purposes. City names are mentioned, but the language obfuscates the ostensible point of the article.
    Tamar Hermes from Los Angeles, CA
    Replied 10 days ago
    @Jadie May Thanks for your feedback. From your profile, it looks like you are new to the sight and possibly new to investing. It can feel frustrating because there are not necessary clear answers as to "where to invest". You will need to define your own criteria, and statistics and analysis will help you. Even if I said invest in this city, on this street, and buy this house you would need to do your own diligence. I wish being a successful investor was that easy. If this article did not resonate, keep on learning and reading—best of luck to you.
    Christopher Miller
    Replied 5 days ago
    Well.. I just bought a property in Northern Virginia right by DC. Hopefully the market doesn't entirely tank.
    HB Jenkins
    Replied 5 days ago
    Hey Chris, I live in Manassas, Congrats on your purchase, where did you end up buying? Are you house hacking and renting by room?
    Joaquin Camarasa Real Estate Agent from Washington DC
    Replied 3 days ago
    Unless you rent by the room is unlikely a property will cashflow in Northern Virginia. There is a meet up happening next Monday in Springfield VA. Nice group that started out of BP.