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By Jacob Blackett
Economically speaking, 2020 has been one of the most difficult years. The COVID-19 pandemic brought with it a financial downfall that has so far affected many industries. To start with, some industries, such as hospitality and travel, were almost rendered defunct. The real estate industry has also taken a hard hit. Many people will barely consider a deal worth thousands or millions when they’re trying to afford the next meal.
However, all is not gloom and doom. Many people remain optimistic towards 2021 as they speculate recovery. While we are still unsure what awaits us in the coming year, we can make some informed guesses.
Will becoming a real estate investor be worth it in 2021? In this article, we’ll look at some reasons why you should invest in the real estate industry in the coming year.
1. The Economy Will Recover
In general, people have kept their spending rates low this year. Whether it’s in retail, commute, or food, many people are saving more money than spending. This has also been experienced in the real estate industry with a 26.6% dip in existing home sales.
So, will the real estate market recover in 2021? Yes, the real estate market will take an upward trajectory in 2021 and improve even further in 2022. Existing home sales have already improved by about 21%. While they are still lower than last year by 11.3%, the sales rate is accelerating. This means you should expect to see more housing projects rising as we head into the new year.
Also, housing prices are already increasing due to rising demand but limited supply.
2. Lower Mortgage Rates
Current and future mortgage rates are most suitable for real estate investors. Mortgage rates hit a record low of 2.99% during the last week of July. This number is expected to stabilize around 3.00%. This is pretty remarkable, as the lowest 30-year mortgage rate recorded until 2020 was 3.29%.
What does this mean for real estate investors? They will have more favorable real estate investment terms in 2021. Low mortgage rates mean investors will have more purchasing power, lower monthly payments, and more savings.
3. People Are Leaving the Cities
2020 has been a game-changer in the way most people work and live. Employers who had earlier on resisted working from home have now embraced remote work. Even large companies such as Google, Facebook, and Twitter have extended their remote working directives until 2021. Furthermore, people want to be closer to their relatives in rural towns.
The demand for housing in the country is set to rise. More people are going to buy and rent apartments and homes in smaller cities. As an investor, you could consider buying apartments in the suburbs and smaller cities to earn rental income.
4. New Home Sales Are on The Rise
This year has certainly been a year of many misgivings, but despite the pandemic, new house sales rose by 4.8%. This is a record high in about 14 years, since August/September 2006. Every region experienced a higher percentage of new home sales in August 2020 than in the same period last year. Homes were able to sell in an average of 22 days, down from 31 days last year.
Economists forecast that new home sales will continue to account for more than 10% of all house sales. Even though the economy is struggling, the sale of new homes is not.
5. Home Prices Will Rise
Ironically, home prices are on the rise. Many experts had estimated home prices would drop by 0.3%. However, this has failed to materialize, and the inverse is happening. Home prices have risen by 3.7%. This is even higher than the expected 3.3% annual rise estimated earlier this year.
This makes 2021 even more optimistic for real estate investors. The pandemic has driven a real estate boom that will last until next year. The demand for homes has been caused by the rising number of professionals who can now work from home. At the moment, many investors have decided they won’t invest in a home by the end of 2020 but will strive to do so in 2021.
6. Renters Continue to Increase
The US consists of 32% renters and 68% of homeowners. The number of renters is set to go up as more people look for cheaper homes outside large cities. With major job losses in the market, many people might not afford to purchase homes.
The population is also growing. A majority of home renters now consist of millennials, who might decide against buying homes because of the flexibility that renting offers. This means that the rental market will remain strong even in 2021.
What other reasons would you be looking for to invest in the real estate market in 2021?
Jacob Blackett – Originally from Reno, Nevada, Jacob began his real estate career in 2010 as a sophomore at the University of Nevada, Reno, when he bought and sold his first two residential “fix and flip” properties in Southern California. Since he made the move to the Midwest in 2012, Jacob has placed over $40 million into income-producing real estate and In June of 2018, he founded SyndicationPro with Ameet Mehta on the basis of providing better technology solutions for fellow syndicators. Outside of business, Jacob enjoys staying active, volunteering as a Big Brother, and education as a hobby.
