It’s been a rough few months for anyone looking for deals, especially on the MLS. People just haven’t sold their homes. It makes sense that the stock is low. With all the uncertainty about the economy, people are using their homes more than ever. Plus, who wants strangers walking around in their locked palace?
Here’s an overview of our favorite Pro Member-only articles from BPInsights in the month of April.
Is the housing market going to cool down?
According to data from the Federal Reserve, the stock hit a national low in October, reaching levels not seen since 2004. This has led to a great seller’s market in recent months. An agent friend of mine recently told me that a place in Denver that he was bidding on for a client was $76,000 more than asked. Wow.
From February 2021, things may change. That month’s US home supply index rose to 4.8, the highest level we’ve seen in May of 2020. For reference, the average for the four years prior to the COVID-19 pandemic was 5.6 – we’ll be back!
What happens if the stock increases?
Supply and demand tell us that, generally speaking, when supply – or housing stock – increases, prices will fall, assuming demand remains constant. Simply put, if there are more homes for the same number of buyers, buyers won’t have to compete as hard as they do now for a limited supply of properties.
My guess is that when this abundance of supply comes to fruition, we won’t see house prices fall, but we will see a decline in the number of properties significantly above demand.
Unless, of course, mortgage rates continue to rise. As I recently wrote on the Pyjama People blog, recent inflation news could potentially push mortgage rates up in the coming months. Even if rates rise, they will likely still remain extremely low — at least from a historical perspective. But these two factors coming together can really slow down the craziness we’re seeing right now. Less competition from buyers and more expensive mortgages feels like a prescription to return to more normal growth rates.
For a more in-depth analysis of the housing market, including how to interpret recent news from the Bureau of Labor Statistics, see Will the housing market cool down in 2021?
Which cities saw the biggest rent declines in 2020?
From bustling restaurants and tightly packed bars to live concerts and massive sporting events, almost every attraction that makes life in the big city worth the big rent has basically ceased to exist since COVID-19 halted in-person gatherings.
In notoriously expensive cities like New York City, Los Angeles, and San Francisco, where one-bedroom apartments in some neighborhoods went for over $3,500 a month before the pandemic hit, many of the young professionals who paid that much to live close to home were the office have taken the term “remote work” literally, packing for faraway destinations in the Sun Belt or even just the nearby “burbs.”
In 37 of the 100 largest counties in the United States, rents for one-bedroom apartments fell year over year, according to a recent report from Realtor.com.
From notoriously expensive big cities to tech hubs and major tourist centers, rents have fallen the most since the start of the new coronavirus pandemic.
To learn more about why rents fell in these locations, see Where did rents fall the most in 2020? on BPInsights.
What is inflation – and how does it affect real estate?
Inflation plays an important role in the economy. With unprecedented levels of government stimulus in recent months, inflation fears are surfacing after years of stability. What does this mean for your real estate career? What does it mean for you?
Inflation may not be the sexiest topic, but it’s an important concept for real estate investors to understand. Real estate is generally regarded as one of the best ways to hedge against inflation risks, and understanding inflation will help you manage potential concerns and better understand one of the fundamental forces in our economy.
Are you not (yet) aware of inflation? In How does inflation affect real estate, I explain:
- What is inflation – and what happens when it rises?
- Why Economists Are Talking About Inflation Today
- The trade-off between real estate and inflation… and why investors shouldn’t worry.
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What is BPInsights?
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- Fresh and unique data. We’ve licensed data from the best providers in the industry to ensure that Pyjama People Pro and Premium members have access to every change in the market, as it happens.
- Property Insights tool. Whether you’re analyzing a new investment or making sure your current properties are priced right, Property Insights provides accurate assemblies to determine your strategy.
- In-depth analysis. Our team of expert real estate investors and analysts analyze market trends to help you process critical information so you can better manage your investments.
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