As we reach the final quarter of the year, few real estate experts are likely looking back on 2020 and boasting about their accurate forecasting abilities. Last year at this time, no one could have predicted the trends that came to define real estate markets in 2020.
Sharing Lost Its Appeal
In response to strong demand from millennials, in recent years, shared amenities have expanded beyond on-site gyms and party rooms. As of early 2020, many new developments were offering buyers access to on-site co-working spaces and playrooms. Some buildings were even throwing in amenities like bowling alleys and rooftop infinity pools.
In early 2020, shared amenities seemed to be the future of residential real estate. But when the pandemic hit, the appeal of shared amenities vanished overnight. Within weeks, people who had been enthusiastically sharing everything from office space to hot tubs were fighting for single-person elevator rides instead.
There is a possibility that the demand for shared amenities will eventually return. But for now, shared amenities no longer appear to be on most buyers’ list of must-haves. Whether this trend persists will depend largely on the pandemic’s trajectory. If a vaccine arrives soon and is able to return life to normal, shared amenities may also regain their appeal.
Remote Work Became The Norm
Remote work has been trending since the late 1990s, but in 2020, it finally became the norm. While some employees will return to the office, there are early signs that for many workers, remote work is here to stay. Real estate markets have already been affected on multiple levels.
As of late 2020, I’m seeing more people than ever before looking to size up in their current neighborhood as home offices are in increasingly high demand. Second, the suburbs and even small towns are becoming increasingly popular destinations as the need to live close to work is no longer a key factor in housing choice for the first time in decades. Third, as remote work persists, more people are realizing that there may be many reasons to take advantage of the lower cost of living in the suburbs.
The Sizing-Down Trend Abruptly Ended
In December 2019, World Property Journal ran an article with the headline “Shrinking Homes, More Millennial Buyers Top 2 U.S. Housing Market Predictions for 2020.” Last December, there was every reason to make both of these predictions. With the pandemic, at least the sizing-down trend hit a huge hurdle.
Factors driving the sudden surge in demand for larger homes include remote work and remote schooling. Another factor has been the return to multigenerational living. Since the beginning of the pandemic, an exceptionally high percentage of younger millennials have returned to their parents’ homes. One August 2020 study found 39% of younger millennials have already returned home or plan to do so, and there are reports of married couples with children moving in with parents or inviting their parents to live in their homes to assist with child care. Both trends are creating a growing demand for larger homes.
Millennials Fled To The Suburbs
Before the pandemic, walkability was critical, especially for millennials. A 2019 Zillow survey found that 60% of millennials said walkability was among the most important factors driving their neighborhood choice. Other studies have found that millennials were more likely to value proximity to amenities. Everything changed when the pandemic hit, work went remote and communal gatherings went out of style. As of late 2020, millennials appear to be leading an exodus to the suburbs.
On this account, however, it is important to note that even before the pandemic, many millennials were on their way or at least thinking about a future move to the suburbs. In fact, the pandemic may have just accelerated a trend already in motion. According to Zillow, pre-pandemic, 44% of younger millennial homebuyers were choosing to purchase in the suburbs, compared to 40% for older millennials.
Mortgage Rates Hit All-time Lows
In late 2019, Realtor.com was among the publications to predict that mortgage rates would start to rise slightly in 2020. The site predicted a bump up to 3.88% by the end of the year. In the end, mortgage rates didn’t increase but plummeted, even dipping to all-time lows. How long these rock bottom rates will remain is yet to be seen. If they remain low in 2021, opportunities could be ripe for buyers as steeper discounts on listed homes also become the norm.
What 2021 holds in store is yet to be seen, but one thing seems fairly certain. It may be difficult to exceed the levels of uncertainty and unpredictability that defined 2020 — a year that no real estate experts could have predicted.