Here are three additional real estate trends we see beginning to bloom:
Trend 4: Cash-out refis are back.
According to CoreLogic, one of the leading real estate analytics firms, mortgage owners saw their equity increase by more than 31% in the third quarter. The Homeowners Equity Report showed “a collective gain of more than $3.2 trillion and an average gain of $56,700 per borrower, since the third quarter of 2020.”
No wonder cash-in refinancing has become a hot commodity in 2021. Black Knight, a leading provider of technology, data and analytics solutions, reported that actionable equity jumped $254 billion to reach a record high of $9.4 trillion. Its latest “Mortgage Monitor” report says cash refinances generated the “highest quarterly equity volume in 14 years.”
Trend 5: Built-to-let homes are increasing in an unaffordable housing market.
As house prices have risen dramatically over the past few years, many millennials have begun to find themselves shut out of the housing market.
Take Boise, where the typical home now costs $519,081 and has skyrocketed 35.6% over the past year, according to the Zillow Home Value Index. According to Mark Meyer, director and chairman of the board of directors of TGB, a landscape architecture firm, the average price of a house in Texas has increased by 35%.
“In Dallas, you can’t buy a townhouse for less than $280,000…Land prices have gone up during covid, and that’s affecting the selling price of a house. We have a huge affordability problem,” he told the NAREE conference.
While our nephew lives the Instagram lifestyle, traveling the western United States and living out of his truck, most people prefer to have a house with walls, floors, a ceiling, and indoor plumbing. So if you can’t afford to buy, you have to rent.
There are approximately 43 million rental properties in the United States and approximately 34.5% of Americans rent, a number that has been steadily increasing over the past few decades. According to RCLCO, the real estate consultancy, about 22 million of these are single-family rental homes. And the number of single-family rental units under construction is on the rise. The RCLCO estimates that rental single-family homes now account for about 5.1% of all new single-family home construction, up from 3.5% in the 2000s.
Not everyone is happy with big private equity and hedge funds hiring builders to build single-family rental homes.
“It’s the most un-American thing in 50 years,” said Alex Kamkar, managing shareholder of Texas-based Bold Fox Development. He notes that the world of investing is “changing the economy and those rents will never go down,” adding that “the rents charged for these communities are so high that tenants can’t save enough for a down payment.”
For now, this trend seems well funded and unstoppable. And in the future? Kamkar predicted that the build-to-let movement would “go badly.” There are so many buildings for rent on the A list [communities] which will become the slums of the future,” he added.
Trend 6: Covid-19 is a trend accelerator and agent of change.
According to the Real Estate Advisors’ annual report on the top ten issues affecting real estate, covid-19 has not only been a trend accelerator, but has forced fundamental economic structural change.
The report details how the fundamentals of the economy are now changing. Employers can no longer take “cheap and flexible labor for granted”. The move towards hybrid or remote work has confused the expected demand and use of commercial and residential real estate. And as we’ve all seen, supply chains remain under strain or are broken.
Two years ago, no one could imagine that the world would almost come to a standstill, offices would close and employees would be sent home to work remotely. Or that employees would choose not to return, putting small business owners, restaurants and other business service providers at significant risk of failure.
As a trend accelerator, covid-19 has driven millennials to buy homes in suburban and rural areas. It used to be that young Americans gravitated to downtown areas, with walkable neighborhoods, public transportation, and plenty of entertainment and dining options. They weren’t the only ones, of course. American adults of all ages suddenly wanted more space.
Covid-19 has also accelerated an extreme version of political polarization, the property advisers report notes.
For real estate investors, “continuing pandemic uncertainty increases the risk of real estate investment” in all areas. Commercial property owners focus on retaining tenants, managing cash flow, and training and retaining the workforce. Small residential landlords, who may own a few properties, are focused on managing tenants and paying rent, while waiting for eviction moratoriums to expire.
And covid-19 highlights the main problem that has affected real estate for the past two years: remote work and mobility. At the end of 2021, real estate advisers noted that only 36% of office workers were back in the top 10 markets, compared to 25% overall. Eighty-three percent of companies are permanently shifting to a hybrid working model, with disastrous consequences for all kinds of real estate: residential, commercial, medical, educational and retail. Companies like Google have postponed the return of their employees to the office indefinitely.
Satisfaction with remote work remains high, according to a number of recent surveys. Goodhire’s recent survey found that 68% of employees would choose remote work over being in the office, while 85% believe their colleagues and other employees across the country would rather work remotely than work from the office. the company. And 61% would take a significant pay cut to stay away.
If these numbers continue to hold, they will have a profound impact on the size and location of new homes and the amenities they include for decades to come. Real estate trends have already changed profoundly to adapt to the pandemic.
We will monitor in 2022.