The COVID-19 pandemic has left no industry untouched, including the real estate industry. Coronavirus has caused restrictions to movements, a plunging stock market, and uncertainty about future income. All of this left an impact on the US housing market 2020 and has made it harder to buy and sell properties. As buyers, sellers and agents try to figure out the path forward, both the American economy and real estate activity have slowed considerably. For real estate investors, uncertainty is now their greatest future risk. No one knows how persistent the coronavirus will be or how long the economy will remain locked down. In turn, investors are asking: What is the future of real estate investing going to look like after the pandemic when the economy re-opens?
Humans are innately collective creatures. More importantly, our economy is fundamentally based on the act of congregating. So, when state and local lockdowns lift and the consumer economy reignites, experts predict that most restaurants, bars, and retail stores will experience pent-up demand. This demand is also likely to be more than they can handle after months of national social distancing and isolation. But what about the housing market? Buying a house or a rental property isn’t the same as turning the Frappuccino machines back on. It’s a big investment decision linked to several economic trends like employment, the stock market, as well as real estate trends like home prices, inventory, and demand.
So when it comes to what the future of the real estate market might look like after the coronavirus, there are no simple answers. Here are some opinions and predictions from housing experts for real estate investors.
New Opportunities for Investors on the Way
Experts are predicting that as the coronavirus crisis sends property values down, real estate investors who target distressed properties might be getting good buying opportunities. According to the Wall Street Journal, hotels, retail properties, and mortgage-backed securities present ripe targets in particular. In fact, distressed properties have already hit the market and experts expect more to come if the pandemic lasts for long. Real estate investors are also poised to take advantage of declining home prices in some areas in 2020. So depending on your appetite for risk, the coming months might actually prove to be a good time to invest in real estate.
Related: How the Coronavirus Will Affect US Home Prices in 2020 and Beyond
A few economists think the recovery of the US housing market after the pandemic will be U-shaped like the one we experienced through the 2008 housing crisis. However, most experts don’t believe this will be the future of real estate this time around. Many have faith that the current frozen housing market will have a rapid V-shaped recovery pointing to the speed with which the economy has bounced back in China and South Korea. So if you’re planning to buy an investment property after COVID-19, the best thing to do is to pay attention to market conditions while conducting your property search. If you’ve found a real estate deal and your investment property analysis shows that it’s a good one, buying right now wouldn’t be a bad move. Still, don’t expect to see profits and ROI until after the pandemic.
Future of Airbnb Real Estate Investors
The sector of the real estate industry that was hit the hardest by the coronavirus is the short-term rental market. Hosts, many of whom rely on their Airbnb rental income to cover expenses, are feeling the impact of the pandemic ever since travel bans took effect in March. Bookings of vacation and Airbnb rentals went down, reaching an all-time low this year according to Airbnb data. Nonetheless, Airbnb has been doing everything it can to support hosts during this difficult time, from setting up a $250 million host relief fund to raising $1 billion dollars from private-equity firms. In fact, the company’s CEO, Brian Chesky, announced his trust that Airbnb will survive after COVID-19 saying: “Airbnb is resilient and built to withstand tough times and we’re doing all we can to strengthen our community and our company”.
Looking at how Airbnb China quickly recovered also gives us hope for the future of real estate short-term rentals. The president of Airbnb China showed his optimism for the future, explaining that the company is experiencing huge growth in short-term trips as China’s economy starts to recover. A recent survey also showed that Chinese hosts are positive and confident about the future of Airbnb real estate investments. Almost 99% of hosts felt either ecstatic or neutral about getting back in the short-term rental market immediately after the pandemic. Plus, 72% of Airbnb hosts added that they would maintain their Airbnb hosting activity in 2020 and beyond.
Related: Will Airbnb Survive the COVID-19 Pandemic?
If you own an Airbnb investment property, one thing you can do to keep your real estate business running is to offer stays for people in need, such as students in need of housing, remote workers, and medical staff who want to stay near their hospitals and self-isolate. Of course, ensure to comply with Airbnb’s cleaning guidelines. Another thing to consider doing in the meantime is to convert your Airbnb into a long-term rental and return to the short-term rental market after the coronavirus. If you’re planning to switch your rental strategy, use Mashvisor’s real estate data and investment tools to make sure that this will be a profitable solution. To use our tools, sign up with Mashvisor and use promo code BLOG15 for 15% off.
The Future of Real Estate Agents
Many states (including California, Washington, New Jersey, Illinois, and others) quickly declared real estate an essential business and permitted home buying and selling during this time. Other states, however, are adamant that real estate activity isn’t an essential business and should be put on hold during stay-at-home orders. Among these states are Pennsylvania and Vermont. In spite of COVID-19, agents are trying to make things work and close deals. Louise Phillips Forbes, a top real estate agent in New York City said:
For the eight plus deals I navigated under contract, every one of them had more than one offer and, in two cases, four to five…We’ve been forced to adapt from the ‘Old School Paper Shuffling Mentality’ to innovation and streamlining everything to get them closed…Banks have learned to support and accept “desktop” appraisals, coop boards are facilitating interviews through Zoom and Skype. We had one deal close recently where there were four cars in a parking lot representing the bank’s attorney, the seller’s attorney, the buyer’s attorney, and the title company ‘masked and gloved’ running back and forth getting signatures. That brings me hope that we can get through this.
This brings us to another trend we can expect to see in the future of real estate, and that is the integration of real estate technology. If there’s one thing the COVID-19 pandemic is teaching us, it’s how to adjust and learn new ways to transact in this business. Due to the current state of the industry, real estate agents need to be more creative than ever to have their listings stay relevant. This is why a lot of agents across the US are transitioning into the digital and virtual world. Agents are now using virtual open houses to expose a listing to buyers without them even needing to be in the area. This new virtual reality is expected to have a long-lasting impact and continue in the future of the real estate market.
Future of Real Estate: Buyer’s or Seller’s Market?
Given current conditions, it might be easy to think that the US real estate market has shifted from a seller’s to a buyer’s market. But not all experts believe this, saying it’s too early to make any US housing market predictions about the future of real estate with any level of certainty. Demand was strong before the coronavirus due to favorable demographics and strong employment. People who were going to sell or buy property 2-3 months ago still show interest in completing transactions – they’ve only shifted their timing down the line. Meaning, while the real estate market might not be as hot as it was before coronavirus hit, the underlying fundamentals haven’t changed. There’ll always be transactions and, in the future, the pent-up demand should help the US housing market recover after the pandemic is over.
Related: Coronavirus Real Estate Update: Is a Buyer’s Market on the Way?
As for the time being, sellers are mindful that now is not the best time to try to drive a hard bargain. They are accommodating as they don’t want to scare buyers off. So, again, if you’re looking to buy property for real estate investing purposes, now might be a good time. To start looking for and analyzing real estate deals in your city and neighborhood of choice, click here.
The Bottom Line
While experts have faith in the future of real estate investing after the coronavirus, you must keep in mind that the housing market moves slowly as it typically takes time to sell/buy a house even in perfect market conditions. In addition, economic crises not only affect people’s pocketbooks but their decision-making as well. The COVID-19 pandemic came unexpectedly and left people frozen, so there might not be a lot of activity in the market over the next few months. However, once we’re out of this, chances are that the real estate industry will be back to “normal”. What this new normal looks like remains unknown.
For real estate investors, now is the best time to really do your market research and look for opportunities. Make sure to use real estate technology and tools like Mashvisor’s Property Finder and Rental Property Calculator to conduct your research and make wise future real estate investment decisions from the safety of your home. Mashvisor aims to keep real estate investors informed on coronavirus trends in the US. So make sure to keep checking our investment blog to stay up-to-date.
