The Azucena Take: Seller’s Market and Investment Real Estate

This is a story that my colleagues who specialize in residential real estate know all too well. They spend months working with their client to find the perfect home. When they find one, they present an offer. Everything looks promising only for the offer to be rejected because someone proposed a lucrative alternative.

The pandemic has fundamentally changed the real estate market as more people are seeking bigger homes to accommodate their new lifestyle. At the same time, the 30 to 40 age group is moving out of apartments and purchasing homes for the first time. This has resulted in demand for new homes to jump by 9.1% while the average price has spiked by 16.2%.

Unfortunately, supply has been unable to keep up with demand. The root cause of this low supply has been a slowdown in construction. There was a boom in the construction of new homes in 2020 but it slowed down starting in December. This was due to the cold weather and the rising cost of materials.

Combine all these factors and you have a seller’s market.

For investment property owners it means they will need to closely monitor the demographic and market changes. Do not expect the demand for apartments to fall as people will always need a place to call home. Demand for apartments will still be strong in 2021 and beyond but the demographics are changing.

Property owners will need to be aware of the shifting demographics and start planning to embrace the changes in a post-pandemic economy.