Here's a look at a few of this month’s more timely real estate trends -- particularly those that impact active investors and their portfolios.
1. Supply is showing signs of letting up
It’s no secret that housing supply has been an issue lately -- well, for quite some time, actually. According to Housing Tides data, the U.S. has a mere 1.6-month supply of homes, hovering just above the record low. This has sparked bidding wars, driven up prices, and made it harder than ever to find properties -- for consumers and investors alike.
Fortunately, it appears there may be a light at the end of the tunnel -- at least, a very distant one. According to Zillow (NASDAQ: ZG) (NASDAQ: Z) survey of over 100 economists, 43% expect housing inventory to grow in the back half of 2021. Another 26% predict early 2022.
It’s more than just projections, though. Data from Realtor.com shows new listings were up 40% last week. While active inventory is still well below last year’s numbers, it’s a sign that sellers are getting off the sidelines and more supply is in the future.
2. Competition is still stiff
Until that inventory hits, the market is going to continue its competitive streak. According to Redfin (NASDAQ: RDFN), nearly two-thirds of buyers faced a bidding war last month. And in some areas, supply is so low that buyers are getting 80-plus offers in just a few days’ time.
The result is a challenging market that requires creative bidding. To win, buyers are having to waive contingencies, lease back the home (often for free), and many times, pay in all cash, just to get noticed.
All that is to say: If you’re eyeing a new investment property, get ready to pull out all the stops.
3. Prices are skyrocketing
Naturally, this high competition is driving prices upward. The latest S&P CoreLogic Case-Shiller Home Price Index has prices 12% higher than they were one year ago as of February 2021. It marks the ninth-straight month of price increases and the highest gain seen since February 2006.
Prices in some hot markets have climbed even more. In Phoenix, for example, home prices are up a whopping 17.4%. The city has led the way in price increases for nearly two years. San Diego also saw steep increases, with a 17% jump, and Seattle came in with the third-highest increase at 15.4%.
The price increases are even happening in urban areas, where people were previously fleeing during the pandemic. In fact, urban single-family homes (read: condos) have seen an almost 20% price jump over the year.
4. Rent relief is moving at a snail’s pace
Congress has set aside billions of dollars for rent relief, with hopes of keeping both struggling renters and landlords afloat. The only problem? States have been slow to implement these measures and issue the funds needed.
Take Texas, for example. Down here in the Lone Star State, the rent relief program has the power to help many. Offering back rent, future rent, and even utility bill payments, it’s a comprehensive measure that could do serious good for property owners and those they rent to.
The only problem? Few people have reaped the rewards. According to recent data, the state has only distributed a mere 3% of its funds.
It’s a similar story in other parts of the nation, too. In Oregon, just 12% of rent relief funds have been spent, and in California, problems with the program’s accessibility are causing holdups for many. When will landlords and tenants get the assistance they need? Only time will tell.
5. Rents are rebounding
Fortunately, there's a silver lining for rental investors, particularly those investing in more urban areas. According to the latest data from Apartment List, big-city rents appear to be bouncing back.
In San Francisco, for example, rents were down over 26% in 2020. Now, they’re up 8.5% since January and down only 19% compared to a year earlier. Chicago and Minneapolis have also closed the gap considerably, with rents down just 6% and 7% over the year. In total, 9 of the 10 hardest-hit cities have seen positive rent growth since January.
Though these cities have yet to reach pre-pandemic levels, declines are shrinking -- and that’s a good thing for investors. As Apartment List’s National Rent Report puts it, “The market has clearly turned a corner.”
The bottom line
The real estate market changes quickly. Want to make sure you’re prepared to invest successfully? Check back every month to catch up on the latest real estate trends and happenings.