The Covid-19 pandemic has rearranged the real estate market over the past seven to eight months. The changes brought on by the pandemic will be lasting and more profound than any changes brought on by previous economic situations. Consumers are now questioning where they should live and how they should live in the “new” world created by the pandemic. The resulting decisions have changed the real estate market in many ways. Here are the new trends.

Accelerated Migration

Real estate platforms like Zillow and Realtor.com have shown that Americans are moving south and southwest at an accelerated pace. People are seeking warmer climates that are not as populated and offer opportunities to social distance outdoors or in a traditional house instead of a high rise apartment community. They are also seeking:

• More Space

• Better Education Environments

• Home Offices

• Quieter Neighborhoods

Real estate platforms have shown that urban consumers viewing suburban homes online is about 50% higher than last year. Data has also shown that urban sellers are listing their homes at a great rate that suburban sellers. Meanwhile, the inventory in suburban areas has declined by about 40% from last year.

In 2020, there was an estimated shortfall of nearly 4 million new construction homes due to the pandemic. Many sellers also hunkered down and did not sell due to the pandemic. This shows that demand is outpacing supply for suburban homes and the migration trend is real.

Increase in the Purchase of 1st Homes and Vacation Homes

Interest rates have fallen to an all-time low during the Covid-19 pandemic. Experts did not originally forecast rates to fall below 3%, but they have done just that. All indicators have pointed to the fact that rates will continue to remain low for the foreseeable future. This has caused an increase in:

• First Time Homebuyers

• Refinancing

• Cash Out Refinancing for Remodeling

First time buyers represented 58% of all purchasers in the first quarter of the year according to a study done by Genworth Mortgage Insurance.

The second home market is also seeing increased buyer interest. With the move to remote work and with interest rates being at all-time lows, buyers are looking to buy second homes in vacation locations such as the:

• Beach

• Mountains

• Internationally

They are focusing on properties that could be used more regularly as they “work remotely” while enjoying the vacation home.

Transactions Take Longer

Buyers and investors have remained active in the market even during the shutdowns that were implemented during the pandemic. However, there are certain logistical items that are taking longer due to the Covid-19 pandemic. These items include:

• Site Visits

• Appraisals

• Home Inspections

• Signing of Documents

Electronic signatures have advanced to assist with some of these issues, but items that require a physical presence have been impeded.

Commercial Real Estate Will Look Different

The Covid-19 pandemic also had a profound effect on commercial real estate. It impacted the demand for space because of quarantines, social distancing, shutdowns, and the transition to remote working teams by many companies. The communal concept of office space will become a thing of the past and office space will become more personalized.

Space in office buildings will need to have increased filtration in our heating, ventilation, and air conditioning systems and embrace social distancing requirements. Property managers will also have to be more aware of enhanced sanitization requirements. They will also need to provide properly trained janitorial services to consistently clean high touch areas.

Private Equity Real Estate is Refocusing

Data has not shown an immediate or substantial decline in private equity investments. Real estate investors are focusing on managing their portfolios by keeping costs low and improving liquidity during this period of uncertainty. There has been a shift away from less resilient assets such as retail properties. There is expected to be an increase in distressed property investment as the pandemic plays out.

The pandemic is far from over and it is still too early to see if these trends will be temporary or permanent. Experts are on the fence as to whether or not the changes in the real estate market due to Covid-19 have been positive or negative. Regardless, if you are considering entering the real estate market, seek the advice of an established professional.