Redfin Chief Economist Daryl Fairweather has authored a report forecasting the future of the post-pandemic housing market. In “Five Ways the Housing Market Will Change After the Pandemic,” Fairweather analyzes five trends the market will see and how the industry will deal with the fallout of the pandemic nationwide.
The five primary changes include:
- Home values will grow as the economy recovers, but at a slower pace as higher mortgage rates may temper demand
- More will list their homes for sale
- There will be great interest in the condo market
- The suburbs will start to feel more like cities
- Rents will rise quickly, especially for short-term rentals
“Some people will be eager to buy a home because they will feel more confident in their own economic prospects once the economy recovers,” said Fairweather. “But some people will look at how expensive homes have become and hold off. As a result, home values will rise about 5% per year, which will be more in line with the growth of the overall economy.”
As we are now seeing a year after the start of the pandemic, mortgage rates are steadily climbing, forcing many out of a chance to refinance yet still unable to purchase due the imbalance between demand and the short supply available.
“Five percent fewer homes were listed for sale in the past 12 months than in the year prior, and currently new listings are down 12% from last year,” said Fairweather in her report. “If most people are vaccinated by 2022, Redfin predicts that the coming year will bring a 10% increase in new listings.”
More homeowners may decide to list their homes in order to cash in on high home prices. Redfin recently reported that for the four-week period ending March 21, median home-sale prices increased 16% year-over-year to an all-time high of $331,590, while 39% of homes sold above their list price, also an all-time high, 15 percentage points higher than the same period a year earlier.
The report also noted that condos will become hot post-pandemic as condos sold at a 17.3% discount to single family homes during the pandemic, the largest discount since at least 2013. Redfin forecasts that post-pandemic condo prices will likely grow faster than single-family home prices and the discount on condos will shrink.
"If you want to buy a condo, now is the time," said Seattle Redfin agent Ben Stanfield. "I tell my buyers that if they're open to looking at condos, we have the ability to negotiate on price and include favorable offer terms like an inspection contingency or a long escrow period. My personal opinion is that the condo market will start to see signs of life coming back in around October."
With the migration away from major metros, remote work will continue to make condos and homes in the suburbs target destinations. The value of a home is closely tied to what amenities are close by, and in the future, more suburbs could have it all—schools, parks, restaurants, coffee shops, and bars.
Recent data from CoreLogic found that affordability, job opportunity, and outdoor amenities remain major driving factors of relocation these days, as most migrating homebuyers chose metros that were either adjacent to their current location, had a lower cost of living, or both.
Finally, Fairweather noted that post-pandemic, many will decide to rent instead of buy a home simply because buying a home will be too expensive.
“Short-term rentals will be especially popular. More remote workers will adopt a nomadic lifestyle, where they roam from city to city with no home base at all,” said Fairweather. “A remote tech worker might spend part of the year working from a headquarters, part of the year working from a satellite office, and the rest of the year in a vacation destination. This will cause prices for short-term rentals to increase.”
Click here to view Redfin’s “Five Ways the Housing Market Will Change After the Pandemic” report.