The COVID-19 crisis has changed the way a lot of people live -- and for some on a longer-term basis. Given that so many people were forced to lock down and quarantine earlier on in the year, it certainly made apartment living -- a common facet of city life -- less appealing. After all, who wants to get stuck in a 900-square-foot unit for weeks on end?
It's for this reason that city residents have been fleeing toward the suburbs in recent months. This trend has been particularly notable in New York City, which was initially considered the epicenter of the COVID-19 outbreak, at least domestically.
But while the aforementioned trends spell bad news for existing city landlords and property owners, investors looking to buy in cities may have a key opportunity in the coming year. And that's one potential silver lining during a period of crisis.
It pays to look to cities in 2021
During 2020's second quarter, Manhattan apartment sales saw their greatest decline in three decades, and the median sale price fell 18%, the biggest drop in 10 years. Granted, as mentioned earlier, New York City was among the hardest-hit cities in the course of the COVID-19 pandemic, and it's also one of the most expensive cities in the country, so it makes sense that residents would flee for greener, larger pastures in surrounding suburbia.
But this trend may not be limited to New York City alone. In the coming months, there's a good chance we'll see more people start to pack up and leave cities, and once more inventory hits the housing market, lower demand will lead to lower prices. As such, there may be a key opportunity for real estate investors to snatch up city homes at a relative discount for a large chunk of 2021.
Let's also not forget that in some areas, home values are tied to the local economy. As tourism and hospitality continue to struggle due to the pandemic, property values in hotspots like Miami may also start to suffer -- which is good news for the people who want to buy those properties at a discount.
What happens beyond 2021?
The appeal of suburban living may start to wane once a COVID-19 vaccine is made widely available and restrictions are lifted. There's a reason people will always be drawn to cities (nightlife, conveniences, and public transportation), and so buyer demand may increase once the pandemic ends. Right now, however, a lot of people are looking to escape urban life, so if you're looking to add city real estate to your portfolio, you may want to plan to do it next year rather than wait.
Another thing: Right now, mortgage rates are historically low, and while they have the potential to trend upward in the coming year, chances are, they'll still stay competitive. Once the economy starts to recover from the impact of COVID-19, however, we could see mortgage rates start to climb, which is all the more reason to look at buying in cities sooner rather than later.