Current Housing Market Trends: What Investors Need to Know

Written in 2021. Kept here as it was published, with dated claims marked.

The housing market had been gaining strength going into 2021. In November 2020, existing house prices grew by 15% compared to the previous year (pre-COVID). Market trends for 2021 indicated that buyers would face high competition as inventory remained low.

Current Housing Market: Seller's Market

Forget the low start in 2020: the last two quarters of the year made up for the slow spring season, according to Realtor.com's Real Estate Market Outlook. Its February 2021 figures showed three things:

• Average Days On Market (DOM): As of February 2021, in the 50 largest U.S. metros, the trend continued. A home that would have taken an average of 48 days to sell spent 12 days or less on the market than the year before.
• Prices keep going up, up, up: Among the 50 largest metros, listing prices grew at an average rate of 10.9% compared to February 2020 (and above the pre-COVID baseline). That month, prices accelerated in all regions compared to the previous month.
• Housing market demand: Homebuyer demand had slightly decreased, as prices and mortgage rates increased. Yet, housing demand remained higher than the year before (pre-COVID).

Real Estate Trends Investors Need to Know

Trend #1: Fewer and less profitable foreclosure properties: in January 2021, properties with foreclosure filings were down 80% from a year earlier. And, according to Auction.com, foreclosed properties were selling for 86% of their estimated value (2021 figure).

In that January 2021 report, the states with the highest foreclosure rates were Delaware, Louisiana, Florida, Indiana and Alabama.

Trend #2: Lower interest rates: a lack of economic activity in 2020 caused the Federal Reserve to provide more funding, and interest rates went down. Low mortgage rates increase housing demand from buyers who want to take advantage of those rates.

Trend #3: Exodus to the suburbs: “Even before the pandemic, homebuyers looking for affordability were finding it in areas outside of urban cores. The pandemic has merely accelerated this previous trend by giving homebuyers additional reasons to move farther from downtown,” said Danielle Hale, chief economist at Realtor.com, in 2021. For flipping investors, this meant that more suburban and rural areas had become desirable areas to venture.

Trend #4: Rental Income Opportunity: due to a combination of the trends above, rents in major tech hubs were declining, but in some markets, rent growth was increasing by double digits, according to Realtor.com's January 2021 Rent Report.

Trend #5: Mobile or Online Interactions: due to the pandemic, online real estate services became almost 100% virtual: virtual tours, virtual showings, virtual agents, and virtual buyers. As the housing market started to recover in the mid-summer of 2020, house sellers turned to online:

• Online closings: Many sellers expected to sell their houses without having to see anyone. In 2021, digital transactions in real estate became the new normal.
• Skip listing: The promise of a hassle-free sale, with no repairs or showings, is appealing, and sellers were willing to make less profit. Note: less profit was still more than they expected to receive before house prices increased.

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