What to Expect in the Rental Market This Year
Most investors would agree that 2020 was definitely a year of surprises. Given the conditions of a pandemic viral outbreak, no one expected the US real estate market to grow by about 10% over the previous year. Fortune magazine describes a ‘house-hunting bonanza which gripped America.’ In fact, new home sales went up by 42% percent in the second quarter, despite the economy shrinking some 32% percent over the previous year.
So what can property owners and investors expect from the rental market in 2021? There may be a feeling of uncertainty for some, wondering where to invest and whether or not to buy or sell. Market studies and surveys show certain facts on which to plan our investment future. Other data and information may be open to conjecture and speculation. Some facts are:
- The housing market still presents solid investment opportunities
- Investment returns can vary quite a bit from place to place
- Demand is high, and both buyers and renters are demonstrating considerable interest
Reasons for the first and third bullet points may vary, as the pandemic has created some unexpected circumstances that have actually benefited the real estate market, despite the expected recession.
- Working from home. Housing demand was previously inextricably linked to commuting convenience. However, now that many have the option of working from home, housing demand can be driven by preference of environment and availability of amenities. Quality of life takes precedence over distance to commute.
- Schooling from home. Families now require more space for online learning. Renters and buyers alike are creating a demand for housing with appropriate space and infrastructure for multiple remote work and schooling stations.
- Mortgage rates. Interest rates are at an all-time low and are likely to stay there for a while, especially if locked in now.
As 2021 gains its footing, smart investors consider what opportunities the future may offer. A property management company in Charleston SC can provide professional insights into the local application of current data.
Diminished Inventory . . . or Not?
Because of the increased demand for housing, prices have gone up and inventory has gone down in 2020. Related to this is the fact that construction of new housing has struggled, with fewer building permits issued in the second quarter of the year. However, as the second quarter ended, a suburban shift caused US building sentiment to reach a 35-year high, suggesting that the market inventory will rise. All of this translates into good news for investors who have entered the rental market. But the question investors looking to expand their rental portfolios are asking is whether there will continue to be a diminished inventory in 2021. Expectations abound, with some claiming the market prices will dip and others predicting they will rise. Regardless, the unexpectedly high demand in 2020 may drive increased supply, and even if prices do rise, serious investors are in it for the long-term gain, which means they will likely see a healthy return at some point.
Will the Housing Market Crash?
Most experts say that any severe downturn in the market is not likely. One forecast predicts that price growth will stabilize at around 2.6%. Here are some of the reasons why a crash in 2021 seems unlikely:
- Demand remains strong
- Favorable interest rates persist
- The pandemic, job loss, homeschooling, and remote working are fuelling the transience of the market
- Because of the Tax Cuts and Jobs Act (TCJA), people are moving from high-tax states to low-tax states, further buoying the demand for housing
The transience of the national workforce feeds the rental market. Working from home means that people can live where they prefer rather than being forced to choose from available housing within commuting distance. Companies can transfer workers to other locations without physically moving their families, but also, families can choose where to live regardless of where family members are employed. Increased job loss, while disturbing, means that skilled members of the workforce are seeking employment elsewhere or becoming local entrepreneurs. Investors now have the option of widening the area of their investment to take advantage of profitable markets in other parts of the country. Recent reports show where the markets are hot and where they are stagnant or in decline. A property management company in Charleston SC can help investors explore opportunities in the healthy real estate market in that area.
Is Now a Good Time?
Many are facing the decision of whether to sell or rent, to invest or wait. Of course, the responsibility to perform due diligence in analyzing the market trends lies with each investor, but long term investors know that rental investments can provide lucrative returns even when the market fluctuates. Advice and predictions proliferate, but hiring the professional services of a property management company in Charleston SC can help investors to navigate the murky markets of the pandemic with success.