Heck a year, to say the least. For the sake of brevity, let me be short and sweet. Here are my predictions for 2021.
The plague
The very obvious question is whether there will be a negative impact on real estate due to Covid-19/Coronavirus. Short answer, yes. Long answer, yes again. This is especially true in the commercial space of the mall. Restaurants depend on residual income from a prosperous society. America is a rich society. The per capita of nearly all of society’s accoutrements is off the charts. The overabundance of restaurants, gyms, spas, supermarkets, and even tire repair shops pales in comparison to other societies and even Western democracies. Ergo, America has suddenly realized that it doesn’t need as many restaurants as it thinks it does, when eating at home is considered more economically sensible, in a time of uncertainty.
My data sources, such as quarterly reports from Deloitte & Touché and CCIM (Certified Commercial Investment Managers), indicate that office space (for very obvious reasons), retail, and multi-family housing are going to hit a rough patch in the next 18 months to mid-2022. But for warehouse and industrial space, life is exceptionally good. The need to accumulate resources and provisions for consumers is quite evident.
On a miscellaneous note, home sales, which are not related to commercial real estate, but are residential real estate, are doing exceptionally well. This strong disposition is the result of many Americans having abundant resources (and job stability), which allows them to buy houses and/or an improved house. This is also partial for fear of raising interest rates; the need for property, personal space, and solitude; and probably a bunker mentality, in which existentially some fear hordes of people wandering desperately for food in fake Dawn of the Dead realism (and cable news overload), but on the surface there is no threat, but only in the psyche itself. It is important to note that despite the chaos, the unemployment rate is still only 6.7% as of November 2020.
Interest rates
As I correctly predicted last year, rates hit a new low, causing a spike in market activity. According to economists’ predictions I’ve read for 2021, because there’s some dissent within their mindsets, interest rates will fluctuate back and forth, but they should be about a fifth of a point lower than they were at the end of 2020. That works out to about 2.90% for the 30-year fixed rate.
seller’s market
In most locations in the US, it will be a seller’s market, which is inversely related to demand. That is, when you have a higher demand from buyers, it will result in an increase in house prices, which will result in a seller’s market.
broker productivity
This revelation is truly dear and close to my heart, given that I was previously a commercial real estate broker for twenty years before I started buying houses on my own. The fusion of technology for residential brokerage has been a long time in the making and will see a number of more efficient brokers emerge, perhaps also competent ones, as the number of closed transactions is expected to increase in 2021. This is partly as a result of technological advances. On the other hand, in 2019 the average number of homes sold per residential broker was 50.7 homes. In 2021, there is expected to be a marked improvement in that number, with more average brokers taking less time to close transactions.