The Pandemic Real Estate Trend You Cannot Afford to Ignore

The Pandemic Real Estate Trend You Cannot Afford to Ignore

In an era of stay-at-home orders and lockdown mandates, it surprised many investors when Americans started packing their bags and considering moving elsewhere. In 2020, the year of COVID-19 and a heretofore unprecedented health policy called the “economic shutdown,” nearly half of all Americans are considering moving sometime within the next 12 months. Although many analysts hope the end is in sight for the current state of ongoing stop-the-spread policies in 2021, this year likely changed our ideas about homeownership permanently. This could result in a rash of household moves lasting much longer than the coronavirus itself.

Lending Tree chief economist Tendayi Kapfidz explained the results of a recent study conducted by the company. “A lot of the reasons people are thinking about moving are related to the pandemic and the recession,” he observed. Between February and July 2020, the United States Postal Service (USPS) processed nearly 16 million residential change-of-address requests. Most analysts agree that the majority of these requests had everything to do with the COVID-19 pandemic, financial factors, and regional health policies.

D’Vera Cohn, a senior writer and editor for Pew Research, summarized the results of a June study of 10,000 U.S. adults who provided their outlook on moving. “About a quarter (28 percent) told us they [chose to move] because they feared getting COVID-19 if they stayed where they were living.” In that study, about one in five respondents said they moved to be with family or for financial reasons. The end result is that households are migrating in the United States today, and investors must be aware of the underlying motivations for this migration in order to respond effectively and strategically in 2021.

Urban Density and the Urban Exodus

Probably the most “high profile” reason for a resident to leave a living location is the desire to live in an area of the country that is less densely populated. This has led college students to abandon campuses en masseeven when classes continued to meet in person and urban dwellers in big cities like New York City, Chicago, Los Angeles, and San Francisco – to name just a few – to head for the suburbs or even rural areas of the country. Real estate analysts tracking this urban exodus note that most people are seeking more outdoor living space, single-family residential options, and less crowding.

Many homeowners are also hoping to “ride the virus out” in the comfort of a preferable living space with fewer restrictions on movement and more square footage in which to spread the family. This has led to an influx of buyers in traditional vacation areas, such as beaches and lakeside communities, who plan to remain in the area for much longer periods of time than just weekends during “the season.” Adjusting your short- or long-term rental properties to the needs of this population could be a great way to optimize your returns on rentals during this period.

However, urban trend-watchers warn that crediting COVID-19 with the ongoing urban exodus we are seeing today is an oversimplification. Migration out of big cities was already a long-term trend before the virus hit U.S. shores, although COVID-19 certainly accelerated the trend dramatically. New York City has experienced the highest losses and had been second on the list of most-moved-out cities in 2019; it tops the lists in 2020. Interestingly, only one city on that list is located in the southeast (Naples, Florida) and that city was the most-moved-out city in 2019 but has fallen to sixth place in 2020. The southeast has experienced a dramatic uptick in inbound migration this year thanks to affordable cost of living, temperate climate, and relatively relaxed restrictions on business and movement compared to the northeast and west coast.

What Buyers and Renters Want When They Move

As more information about the virus becomes available, the things Americans are looking for when they move have become more specific. Kapfidze made particular note of the ways that remote work and remote school have changed homeowner needs. “People are working from home more, so you need different things to be comfortable. Perhaps you need extra space; perhaps you need a separate room dedicated for working.”

Of course, there is a growing demand for outdoor living space as well. Also a popular trend prior to the pandemic, now outdoor living areas are very nearly a necessity. As the holidays approached and the days turned cooler in most areas of the country, the need for winter-friendly options emerged. Fire pits, fire tables, and outdoor heating units were backordered for months at major retailers, making the southeast once again one of the most desirable locations in the country. In Georgia, for example, the average temperature in December ranges from 53 to 59 degrees Fahrenheit. Florida average temperatures for the same month tend to be six to eight degrees warmer, and South Carolina posts an average December temperature ranging from 60 to 65 degrees. If you want to use your yard as an extension of your home, particularly for holiday gatherings, then living in a region where the temperatures will permit this and health policy seems to indicate the local government will do so as well is crucial.

More Renters are Moving than Homeowners

Although more than a third of homeowners told Lending Tree they were considering a move in 2021, more than half of renters said the same. This is typical of migration trends also, since renters tend to have an easier time making a move simply because they are tied down only by their leases and their budgets rather than the need to sell their current home. The deciding factor for most households considering a move will likely be financial, the Lending Tree survey concluded. Cutting expenses by moving to a more affordable area of the country or moving into a larger home that will enable more family members to live together comfortably could help households weather the ongoing financial strain associated with economic restrictions and business shutdowns.

Sharing fixed expenses and pooling future government support checks could make the difference for many households. You can see that areas of the country with better housing affordability rates are certainly seeing the most population growth at present. On the other hand, New York City, Brooklyn, Chicago, San Francisco, Los Angeles, Naples, and Washington, D.C. all lost at least 15,000 residents just in the five months measured by the Pew analysts in early- and mid-2020. Of particular note: Washington, D.C. was not anywhere near the top for most-moved-out cities in 2019. However, it sprang to 7th place on the list in 2020. This is likely a result of restrictive lockdown measures and small, expensive living spaces that are the norm in D.C. and other cities that top the list for this year.

Don’t Break the Bank to Start Investing

In 2020, all the news about skyrocketing home prices has a lot of real estate investors thinking they will have to pay the same sky-high purchase prices for their investment properties that homeowners and renters are currently willing to pay for their new residential locations. However, this is not necessarily the case for three reasons:

-Real estate investors can and should leverage access to established lead-generation networks to acquire off-market deals and keep purchase costs as low as possible.

-The most affordable areas of the country are currently the most desirable, so invest there.

-Remote work has changed the nature of the “must-have” list. Investors should update current properties with low-cost and high-impact upgrades like patio spaces to increase returns without significant overall financial outlay.

Do not let the pandemic housing market, which is, honestly, thriving, convince you that there is not opportunity for you in the real estate space. Now, more than ever, real estate investors are playing a significant and important role in the upkeep and flow of housing options into communities. Be a part of that positive movement and create benefit for your investment portfolio in the process.