The current year has been quite surprising for real estate. It’s killed opportunities while birthing other markets, like coworking and flexible work. However, real businesses must prepare for the future while dealing with the present.
With that in mind, we’ll cover many experts’ views on what’s to come. That means going through expert opinions about the current year and what the future holds. The key aspect to learn here is how you can prepare.
What are the experts saying?
The Huffpost recently published an article about 2021 predictions. Luckily, a lot of the points brought up by it relate to our current context. It tackles subjects like mortgage rates and the housing market.
The article brings up 3 important considerations for those who want to predict where the market could go next year.
Mortgage lows
Most real estate firms know that mortgage rates have faced significant lows this year. That means buyers can take advantage of low rates. They translate into more affordable monthly instalments, and potential savings around the thousands.
Yet, we need to consider the home market supply right now. Sellers have withdrawn from the market, and that means prices are still high.
Upcoming buying opportunities
So, the market is beneficial for home buyers, yet prices are still relatively high. That means that the best opportunities aren’t here yet. Once government aid ceases, the real estate market will see the largest shift. Unfortunately, that means many people won’t be able to afford their mortgages and leases, thus birthing foreclosures.
Home buying during the crisis
Right now, it might seem like a good moment to buy a house. That could be true, but we also need to consider upcoming circumstances. Even with higher supply promises down the line, many people still lack the financial stability to invest in a home. The best approach is to wait and see.
Current-year forecasts
Back in 2019, FinancesOnline released a post on 2020 and 2021 real estate trends. They pointed out 9 predictions, and it’s an interesting look now that we’re basically between the two years. However, they’re still relevant, and comparing them with the current situation can shed light on where we’re headed.
Investment boost
The first prediction was increased investments after the 2018 economic decline. Logistics seemed to be the main focus for investors. The prediction was for these expenses to become more popular, and it’s somewhat true.
Even with the current global crisis, there hasn’t been a recession. It also makes sense, the crisis has actually increased that need.
Home pricing slow rise
They also predicted that prices for homes would rise. That’s an interesting prediction, as it’s both a hit and a miss. The COVID crisis has impacted supply negatively, and that has raised prices. However, other experts now predict that prices are only going down. With high possibilities for future foreclosures, the picture isn’t quite clear yet.
Milennial influence
They also predicted that prices for homes would rise. That’s an interesting prediction, as it’s both a hit and a miss. The COVID crisis has impacted supply negatively, and that has raised prices. However, other experts now predict that prices are only going down. With high possibilities for future foreclosures, the picture isn’t quite clear yet.
Affordability demand
House renting used to be the main option for people. Today, it seems to stay that way. However, given the new influx of financially stable millennials, affordable home demand is more likely to rise. We also need to consider that affordable homes are somewhat scarce in the real estate market, so a shift will be necessary.
Second-tier city shift
That actually leads to the article’s second prediction. First-tier cities mean higher prices for real estate, and that’s pushed even larger firms towards second-tier. Now, the remote work trend further moves people towards these locations. As such, this trend seems to have an upwards future statistics-wise.
New software
The real estate sector has also experienced lots of innovations throughout the years. ERP platforms today do almost everything you need. Therefore, the article pointed out that new tech would remain a priority for 2020 and 2021. Now, we can see that’s true, especially considering the ability to collaborate remotely with software like Office 365.
Mortgage interest rates
Another interesting prediction is that interest rates would rise after remaining stagnant for years. We’ll cover the real state of mortgage interest rates in a moment. For now, we can say this prediction wasn’t accurate at all. The COVID crisis shook the market, and mortgages are actually one of the reasons why home buying will likely become a trend.
Luxury home availability
Luxury inventories from real estate firms were also expected to grow. That’s because higher prices would incentivize companies. The main consequence would be lower prices, and that’s what we’re experiencing right now. Yet, the reason isn’t solely the higher prices, but we also need to consider current supply and demand.
Customer amenities
The last prediction was the need for amenities to drive more customers towards company offers. Some of these amenities include parking, gyms, communal gardens, and even movie theaters. This prediction is also an interesting one, for it was accurate for the wrong reasons. Remote work becoming the rule has increased the demand for fully-featured homes and residences.
How do those stack up to 2021?
Marketing company Linchpin released an article a few months ago, detailing several trends for 2021. We’ve chosen this article because of how it contrasts the trend predictions from FinancesOnline. In fact, several of their suggestions relate directly to the previous article. It serves as a combination between both forecasts to bring a better outlook for the future.
Millennial influence
The first prediction builds on the previous millennial-related forecast. It uses the same statistics from Forbes to solidify their stance. Given how millennials adapt to remote work, there’s little reason to believe this prediction will fail. Even if they’re hit considerably by the COVID crisis, they’ll likely overcome it better than other generations.
Loan requirements
Down payment loans in 2020 are actually growing in popularity. Many requirements have loosened, making it a lot easier to find a lender for buying a home. People who were turned down could actually apply and win their loan request. First-time buyers have the bigger advantage here. It doesn’t mean it’s easy, but it’s more possible.
Foreign investment
2018 tax laws deterred foreign investors from buying luxury homes like they used to. Most buyers come from either Europe or Latin America, but China is also a prominent location for these buyers. Given the political tensions between the US and China, it’s no surprise that their investments experienced a recession.
Low pricing demand
We go back to affordable housing. RIght now, high-tier homes have experienced slower sales, but that’s not the case for their low-priced counterparts. Millennial influence over the market has a lot to do with that, and affordable home inventories have seen the most success.
Mortgage interest rates
As mentioned, mortgage rates have plummeted during the crisis. That’s quite the opposite of what FinancesOnline predicted a year ago. However, that’s good news for the real estate industry, for prospective buyers actually have more incentives to purchase a home than ever before.
Second-tier cities
Again, the first article was quite accurate with its assessment of second-tier city demand. Forbes hit the same prediction earlier this year. As society starts to recover from the crisis in the future, affordable housing will play a vital role next year—and maybe beyond that. Even larger companies like Toyota have moved to second-tier cities to curve the crisis’ financial impact.
Hottest markets
The most prominent markets for real estate will definitely shift during 2021. We already mentioned the demand for second-tier city housing, and that means these locations will likely become some of the most important markets for real estate. However, we can’t forget about mortgage rates and how attractive they could become for foreign investors and luxury housing.
Competitive housing
It’s worth noting that housing amenities are key for the housing market today. Students and remote workers will boost this demand considerably. As people recover from the crisis, they’ll likely get used to these conveniences. That means this competition will likely remain—and even increase—in the future.
Home staging
As competition in the real estate sales sector increases, home staging will also become more important. With increased supply, and millennials’ introduction as a prominent demographic, sellers will need to improve their offers’ attractiveness. That takes us back to logistics investment, as we already mentioned, which will likely remain a priority.
Video marketing
Virtual home tours have become standard for real estate companies. Especially with lockdowns and social distancing, video marketing offers the best way to showcase houses and properties. It’s more comfortable, and more buyers are getting used to it, so they could become more popular than physical tours next year.
We’ll touch on marketing later on. For now, let’s look at other important forecasts.
Commercial forecasts for 2021
Now, let’s look at 3 more forecasts that focus on commercial real estate. Most of the previous predictions focused on the housing sector. Nevertheless, commercial real estate also saw a big impact, especially during strict lockdown laws. Commercial space traffic plummeted, and that bred its own share of consequences.
The real estate law blog, Gravel2Gavel, released an article last month. It focused on the commercial real estate forecast, and it touched 3 key factors.
Loan modifications
Shutdowns were massive during the COVID crisis. Those who survived—both tenants and property owners—had to negotiate special clauses with lenders. Loan modifications sprung from property owners failing to pay their debts; this also resulted from tenants failing to pay their rents. During 2021, we’ll still be recovering from the crisis, so these modifications are likely to remain.
Lease modifications
The same was true for lease agreements. Commercial landlords had to agree to alter the lease agreement clauses because of remote work becoming the norm. The decrease in footfalls also meant tenants’ profits suffered greatly. Commercial space might experience reduced footfalls during recovery as well. As leases expire, office spaces will likely lose demand significantly.
Environment changes
Finally, COVID also bred additional policies for commercial spaces. Direction markers, distancing, and temperature checks became standard. Hand sanitizers are another great example. As we recover from the crisis, commercial landlords will have to adopt technological innovation to improve these measures. Safe environments will likely become the norm for a while.
A marketing perspective
Finally, we need to assess the marketing changes brought by 2020. We already mentioned the increased need for virtual tours, but that’s not the full extent.
Dialogtech, a marketing firm, released an article a couple of weeks ago touching on this subject. While focused on call tracking, the article did bring several points that most companies should keep in mind.
Ad spending
Real estate has seen one of the most noticeable increases in marketing expenses in 2020. This spending is only expected to grow as competition increases. It’s not only because of the supply increase against demand we already mentioned. Social media cost-per-lead will also shift upwards because of that.
Support request volume
During the COVID crisis, calls to real estate firms increased noticeably. It’s only natural; after all, it’s a great way to request support with social distancing laws. The same is true for virtual channels like live chat and email tickets.
Virtual tours
We already mentioned this, so there’s little reason to dwell on it too long. Virtual tours became the standard during the COVID crisis because of safety regulations. Now that consumers have experienced how comfortable they are, chances are they’ll increase in the future.
Mobile accessibility
All of these support and sales channels have one thing in common: they’re all accessible from mobile devices. We also need to consider millennials’ influence and their high usage of mobile devices. Therefore, phones and tablets will become the standard contact channel with real estate firms.
Omnichannel service
That means companies can’t overlook any of their contact channels. Most firms provide an excellent service in person, yet their customer experience often falls short on the internet. It’s vital to employ the latest innovations like VOIP, tenant portals, and even offshore help desks to provide the ultimate experience. That should be the same regardless of the channel used.