What will the housing and real estate market look like in 2021? This past year was certainly a blockbuster for real estate despite the economic uncertainties leveled by the pandemic. According to a recent Redfin 2021 prediction report, the housing market in 2021 will be better than this year, will sales volume increasing and home prices rising. A few other noteworthy trends worth highlighting are:

Prediction #1: Mortgage rates will remain historically low at 3%.

Prediction #2: There will be more home sales than in any year since 2006, but price growth will slow.

Prediction #3: There will be more new homes built than in any year since 2006.

Prediction #4: The number of Americans relocating will be the highest it has been in 16 years.

Prediction #5: The homeownership rate will reach 70% for the first time since 2005.

The report summarizes their findings:

The housing market will remain strong through 2021 as the economy recovers from the pandemic-driven recession. In early 2021, homebuyers will remain undeterred by the pandemic, eager to take advantage of sub-3% mortgage rates while they last. Later in the year, the worst of the pandemic will hopefully be behind us, and as businesses reopen and daily activities become safer, a new batch of homebuyers and sellers will enter the housing market, making for the strongest year of home sales since 2006.

The rumblings of a hot 2021 market are already evident, according to recent single-family housing starts from the St Louis Federal Reserve:

Source: FRED

Fang Block of Mansion Global comments on the Redfin data, concluding that “the U.S. housing market will get stronger through 2021 as the economy recovers from the pandemic-driven recession, while mortgage rates remain historically low.”

2020 has indeed ended with a bang 💥, according to Redfin data, sales-to-listing prices are up 99% year over year, and home prices are up a total of 15%.

Source: Redfin

Source: Redfin

Feeling the pinch

Not all is rosy looking into 2021, particularly for commercial and office space according to a new Bloomberg article titled, The World’s CFOs Have a Dire Message for Real-Estate Investors. Jack Sidders reports on a study of over 4000 earnings calls, in which 1 in 8 noted cuts to real estate footprints.

Hundreds of corporate executives tracked in earnings calls around the world in the past five months addressed the urgency to cut real-estate costs, according to an AI model trained by Bloomberg to scour transcripts. Tactics include cutting office space, accelerating branch closures, renegotiating rents on warehouses and even shutting data centers.

Branch closures and office space reduction were high on the list of cost savings measures by companies heading into 2021. Indeed, the measures will have a long-tail and depend extensively on the coming economic recovery, but the short-term pain in certain asset classes is clear to many public company executives.

Couple all this with an excellent Inc.com piece titled, In 2021, The 9-to-5 Will Become the ‘3-2-2,’ showing what the new workplace normal may look like for most companies heading into the new year.

But, where there’s pain there’s opportunity, according to a recent article by Karen Gilchrist of CNBC. In an interview with some leading real estate investors, Gilchrist reports that there is an opportunity for investors “to take advantage of distressed real estate assets…the current economic downturn had devalued otherwise sound assets.”

Rent

Rent collections have been followed closely by investors throughout 2020 as an overall indicator of the health of the real estate asset class, particularly in multifamily. In a recent press release, Zillow reports that annual rent appreciation increased from 0.7% in October 2020 to 1.1% in November, improving for the first time following an eight-month downward trend.

The typical U.S. rent was up 1.1% year over year in November to $1,734, after sliding from 3.9% growth in February to just 0.7% growth in October. Among the 100 largest U.S. markets, monthly rent growth was highest in Stamford, Connecticut (3.1%), Providence, Rhode Island (2.3%), and Ogden, Utah (2.1%). 

Yield Pro conducted an interesting look back at 2020 multifamily rents that is informative for investors.

• May: 96.6 percent rent collected in 2019, versus 95.1 percent in 2020.
• June: 96.0 percent rent collected in both 2019, versus 95.9 in 2020.
• July: 96.6 percent rent collected in 2019, versus 95.7 percent in 2020.
• August: 95.8 percent rent collected in 2019, versus 94.5 percent in 2020.
• September: 95.5 percent rent collected in 2019, versus 94.6 percent in 2020.
• October: 96.6 percent rent collected in 2019, versus 94.8 percent in 2020.
• November: 95.2 percent rent collected in 2019, versus 93.6 percent in 2020.

Not bad considering. According to Yield Pro, “delinquency rates for multifamily remained low despite the economic downturn as a result of COVID-19. Specifically, 98.3 percent of apartment loans were current as of August 2020, up from 98.1 percent in July. Rents also remained relatively stable despite dire warnings that we’d see mass rent strikes and non-payments.”