What does the real estate investment landscape look like for investors in 2021?
What trends can investors expect to see this year. How might it affect strategy, volume and where the best returns are?
Property Price Trends In 2021
Anything can happen, but based on recent data and the trends seen even through the pandemic and crises of 2020, investors should be confident in overall residential property prices rising.
This continues to be driven by low inventory levels. Especially, with home buyers and renters more interested in new destinations.
Property sales volume ought to max out as much as possible given the number of units that come available for sale.
However, it is important to watch for a tale of two markets and diverging trends. Dense urban markets in the biggest cities which were already over priced may continue to come down. This may be most felt at the mid to high end range of the market. There will certainly be exceptions in the ultra luxury market which remains unfazed or which has benefited from recent crises. Though the most growth should be expected in the lower end of the market and among workforce level housing.
Distress
Now that the controversial presidential election is over so is the uncertainty which kept many investors on the sidelines in the run up to it. A new presidential term also gives the administration some leeway to work through the ugly side effects of COVID, and then spur new growth before the next election.
Without some historically stunning changes, it seems unavoidable that the mounting evictions and foreclosures in the shadows will have to be processed and work their way through the pipeline.
While this may be carefully throttled to minimize the damage to the property market and national economy, it does mean investors should find more deals and better asset prices on distressed properties throughout 2021.
Interest Rates
The Fed has signalled it plans to keep interest rates low. A common sense approach would be to keep rates down to avoid shocking markets and derailing any economic recovery.
As a result it continues to be a good time to borrow and use financial leverage. Investors can reasonably expect loan rates to remain historically low if they are utilizing bridge loans to redevelop properties and hope to lock in long term fixed rate debt on income properties by the end of 2021.
Access To Credit & Financing
While the US real estate market is expected to stay strong and interest rates low, we did see some major banks pulling back on credit in 2020.
This included JP Morgan requiring higher credit scores and larger down payments on homes, Wells Fargo ending home equity lending, and Capital One slashing credit card limits. Those moves may prove to be counterproductive for them.
Expect traditional banks to remain conservative in 2021, and perhaps constrained by defaulting debt behind the scenes.
On the bright side, investors should find access to capital through private money lenders. That process of purchasing new assets and refinancing may be even easier than expected thanks to smarter underwriting processes and new technology.
With the right lender, investors should find capital plentiful, and with the right connections and marketing, all the deals they can handle this year.