How many times have we all said that 2020 is the worst year ever? And with good reason! Especially for New York, right? Tens of thousands of COVID deaths, a flash mini-economic depression, and worrisome social unrest has been a rather dismal mix to endure (to say the least).
Is there a silver lining in this cloud? For real estate investors, there appears to be. I reviewed multiple sources for this blog post, but an excellent comprehensive overview is a blog by Norada Real Estate Investments. Check it out if you want to dive deeper into the outlook for the U.S. housing market in 2020 and 2021.
It appears that the worst of the current COVID caused housing slump is behind us. Prices are strong. For the first time ever, the national median price of a home surpassed $300,000 in July. Also encouraging, national sales rose 21 percent, and unsold inventory shrunk to 3.1 months. What’s behind these rosy numbers?
Record low mortgage rates and a shortage of new inventory are fueling demand. The economy is bouncing back in a big way. The latest unemployment numbers show a trending decrease in new claims. Overall, U.S. unemployment now stands at 8.4% – a much higher number than the 3% or so that we saw pre-COVID, but way down from the nightmare 20% plus number in April.
As COVID restrictions ease nationwide, the economy is rapidly recovering and housing is rebounding. The only missing link? A lack of new listings. Sellers are returning to the market, and as they do, our national market uptrend should continue.
According to Realtor.com’s latest report, the Housing Market Recovery Index reached 105.6 nationwide for the week ending August 9th (this data lags a bit in reporting). What is the Housing Market Recovery Index? Click here for a quick overview, but basically it tracks where the real estate market (demand, prices, supply, etc.) is trending post-February 2020 or post-COVID. The real estate market has now exceeded the levels it reached pre-COVID. That’s incredibly good news! Let’s hope it lasts.
Will it last? That’s (literally) the billion-dollar question.
I’m optimistic both nationally and for Westchester County. Especially for REIs (landlords). Increasing sales, robust turnover, and rising prices are driving up rental rates. According to CoreLogic, a data analytics firm, the average rent for a single-family home increased in May 1.7 percent. Rents for the cheapest homes rose by 2.8%. Again, this is lagging data, but everything is moving in the right direction.
Here is a chart of rental vacancy rates in the second quarter of 2020 by region:
Looking past 2020, I see encouraging signs and possible problems. If we can keep the COVID situation under control and if the November election process goes smoothly (meaning no huge controversy on declaring a winner which drags on for weeks or months), then the economy is poised for further recovery and growth.
If the November election becomes a nightmare – the opposing sides battle it out in court (think Bush v. Gore on steroids) – then we might be in for a rough ride. If COVID comes roaring back and the government chooses to re-impose restrictions on movement and activities, then we return to wallowing in the mud.
As we have all learned the hard way from 2020, we cannot assume anything anymore. We can, and must, look at all of the relevant information, trends, and factors and make the best decisions possible.
I’m bullish on the real estate market overall and on the rental market in particular. Demand is strong. We see this in Westchester County – especially given the unique factors that are affecting our local market (read my recent blog on this subject).
Hopefully, the worst is behind us! I’m betting that the rest of 2020 will be far better than the first 6 months of the year.
If you have a residential property or properties in Westchester County that you are interested in renting, now is the time to put them on the market. At Sterling Property Solutions, we have a team in place that can answer all your questions and address any challenges. If you are already a landlord and you no longer have the time or desire to handle rental property management on your own, we can help. Maybe your current property management company is not giving you the top tier service you deserve. If so, reach out, we are there for you.
Please give me a ring at 914-355-3277 or send me an email at Linda@Sterlingpsi.com. Together, let’s form a plan for you to take full advantage of the current conditions and put in place a robust, long term program for your success.