COVID-19 Pandemic Has Caused Huge Changes in Real Estate
The coronavirus pandemic has caused drastic changes in real estate from prices to start-ups, this ever-changing industry is shifting and shaping a new future. Currently, we already see big advances in the Los Angeles market, with close to 40% of homes selling at $14,000 above the asking price, according to a report on Zillow.
This heavy indication of heavy demand and lack of supply is only the beginning statue of what we will see take place in the next 20 years. And as the uptick of prices seems scary, the extreme price revenues that will come into play with higher-end development will become a big chunk of history, as it will change the big real estate players to peak in this industry. Development also includes other large cities, such as Chicago, New York City, and San Francisco.
In this fast-growing economy shifts towards ultra-luxury spec homes, where Los Angeles has the most deep-pocketed investors, according to the Local Records Office. And as the population rises, the competition will become the toughest it’s ever been, with bidding wars increasing prices, and with affordability dropping, only 30% of the Inland Empire County residents own a home.
The Local Records Office Real Estate’s Forecast of Los Angeles Housing Prices in 2020
These expansive changes from affordable-housing shortage to a new urban crisis affecting cities, and a string of tragic events due to the costly natural disasters and tax uncertainty propose by Trump’s administration’s policy has greatly impacted the economic tailwind of last year, with an expected expansion and larger structural shifts in real estate.
The housing market whether it is an urban row house, transit-oriented development, or a new type of tract housing, starter homes, and affordable rental units for young adults are potential goldmines for developers who map out the costs, types of projects and build affordable housing at scale.
The C.A.R.’s forecast sees moderate gains in existing single-family home sales, and as “solid job growth and favorable interest rates will drive a strong demand for housing” says C.A.R. President Geoff Mcintosh.
“However, a persistent shortage of homes for sale and increasing home prices will dictate the market as housing affordability diminishes for buyers struggling to get into the market.”
C.A.R.’s forecast of the average 30-year fixed mortgage interest whereas rates will increase to approximately 4.3 percent in 2020, up from 4.0 percent in 2019, and 3.6 percent in 2018, but will still remain low by historical standards.
As wildfires had a huge effect on the Inland Empire County housing, the insurance-driven recovery will help revive the housing market, even though Los Angeles took nearly $10 billion in losses and a $500 billion hit to the economy and some homeowners were surprised to find out they were not covered. With an extra short supply, and even with California residents suffering financially, prices are continuing to rise. You will need an income of $120,000 to buy a home in Los Angeles in 2020. And prices of condos are reportedly $90,000 higher than last year.
High Prices During the Pandemic
The problem, however, is that homeowners do not want to sell and buyers cannot afford the prices, according to the Local Records Office. Despite the dips in September, prices are up to $24K to $30K from one year ago. In the next four years, forecasters are considering all the factors that will come into play – from defeated regulations, a growing economy, to reduced immigration.
• Jobs and employment are being repatriated back to the U.S. from Mexico and China
• Employment already good and is rising
• End to Obamacare?
• End of Dodd-Frank’s restrictions on lending
• Federal easing of real estate development is expected
• “It will take some time for mortgage rates to rise,” says Local Records Office
• Still, there is not enough housing to continue to house Illinois growing population (recession)
Here is a breakdown of the factors affecting housing prices and availability in the Illinois housing market researched by the Local Records Office
- Demand for housing – as an overall heightened demand –“creating all cash-bidding wars” in some cases
- Supply in housing – is far from what is needed
- Mortgage rates – continuing to below, in light of the global economy slackening
- Down payment and mortgage lending rules – as banks are withdrawing, the FHA loans are offering down payments as low as 3 percent
- Employment – very low and remaining low
- Buyer income – low and also not rising by much
- Home prices – high and rising – out of reach for many to consider buying and homes in Illinois are grossly over-priced
- Demographics – Millenials are moving into family and home-buying years, with Los Angeles millennials at the lowest rate of home buying
- Number of renters – is increasingly growing
- New home construction – is slow (from 100k to 140k per year)
- Economic Foreign Trade – Trump expects to reduce the U.S. deficit
- Election Year – Voters are uncertain what Trump will do
- Taxes on the sale price of a home – is great for sellers
Commercial real estate is climbing and expecting more growth in 2020
As developers and commercial property owners will need to focus on providing a great space with the right location, they will thrive when they focus towards an environment that will land for success; with market design and efficiency, as ever-evolving workplace trends (flexibility, green design, and smart office space) likely will increase as the millennials and the generation Z (born from 1995 to 2001) are predicted to hit the post-college housing market and prefer a more urban lifestyle says Local Records Office.
Boomers Are Still Impacting the Housing Market
The huge boomer population will impact the housing market by leaving their suburban homes behind, and be moving towards urban centers, “the expansion of obsolete retail malls are being converted into health care centers nationwide. Real estate generally follows trends in the business world, says Watch, and
“as more women and minorities occupy C-suites, real estate companies increase diversity among their agents and brokers, too.”
Watch also mentions that banks are becoming more constrained to lending due to the new regulations, “private equity funds and other types of lenders will fill the breach, albeit at higher rates.” There will be growth, with a heightened focus on the impact of technology in commercial restate projects and a slow-down of multi-family products.
Shifting Real Estate Technology is Shaping Future Investments
The data is becoming alarmingly more accessible. As new technology advancement gives investors the capabilities to continuously access and analyze volumes of investment opportunities and figuring out the variables are truly important when predicting a real estate investment outcome says, Local Records Office. These incentives also help with drawing out the risks before pouring out their money into an investment.
Automation solutions to ease the landlord’s day-to-day operations are also making their life much easier. A company called Cozy offers free automated rental payments and background checks for a nominal fee. And SMS Assist, a Chicago-based platform takes over the control over repairs and maintenance on thousands of properties across the country.
Virtual reality is becoming a huge evolution on investors purchasing outside their local market. This rapid change of allowing you to wander the neighborhoods and see inside properties will also make it easier to get to know an area before purchasing.
Drones Are Becoming an Essential Tool in Real Estate
With Amazon said to be pioneering commercial drone use and home inspection firms to survey roof conditions, some revolutionary companies like United Aerobotics are pushing drone technologies to the next level when it comes to viewing heights and confined spaces, and at a lower cost.
This next generation of drone inspections will provide a safe and efficient solution to enter, climb on top, or even go underneath a residence. These high definition cameras attached to the drone can also capture thermal imaging to detect leaks and other issues, such as mold.