Real estate markets in certain cities, both in the U.S. and abroad, have unquestionably benefited from the coronavirus pandemic, with a flood of high-net-worth buyers from larger metro areas searching for more spacious properties to be locked in at low interest rates. And while buyers normally hit pause on transactions in the weeks before and after a new year begins, there’s no holiday slowdown in bustling housing markets in 2020.
“We’re not seeing any sort of pause whatsoever,” said South Florida-based Corcoran agent Candace Friis. “It’s been very, very active.”
While this means that buyers hoping to beat the competition just after holidays will still be entering tight markets, it also means they may want to move quickly before inventory shrinks further and even more buyers start their searches ahead of the busy spring sales season.
“It’s a good time for buyers who are thinking of entering the market, because as inventory continues to fall, the less opportunities and choices they’ll have,” Ms. Friis said.
Smaller U.S. cities like Sacramento, Phoenix, Austin and Atlanta saw the highest influx of out-of-town homebuyers in October and November, according to a recent market report from Redfin, while three Florida markets—Tampa, Miami and Cape Coral—topped the list as well. On the flip side, New York, San Francisco and Los Angeles all continued to see an outflow of residents.
“There are a few big macro trends happening all at once, the first of which is that people are stuck at home more, so there’s demand for larger homes,” said Redfin lead economist Taylor Marr. “People are working remotely more and might be banking on commuting less frequently. In most metro areas, by moving 20 minutes further out you can have almost double the home size for the same price or monthly payment.”
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Many markets that are currently seeing strength already had an established history as feeder markets from more expensive cities and tech hubs (the prime example being Sacramento drawing residents from San Francisco), but with remote work becoming a more entrenched part of buyers’ professional lives, many are taking their searches to farther flung locations that may offer more spacious homes and be more tax-friendly.
Add to this the fact that cities like Austin and Sacramento are now becoming tech hubs in their own right, and the current rush of activity doesn’t seem poised to slow any time soon.
Across the pond, London is seeing a flurry of transactions this holiday season for a different set of reasons, and in spite of the fact that many city dwellers opted to decamp to country homes for more comfortable lockdowns.
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“December is usually very, very quiet for us, and this year it’s been remarkably busy,” said Martin Bikhit, managing director of Berkshire Hathaway HomeServices in London. “Anything that has good outdoor space really is flying off the market.”
Low interest rates, the current stamp duty holiday (available at certain price points until March 2021), and a looming 2% stamp duty surcharge for foreign buyers (set to be enacted in April), have combined with pent-up demand both from the pandemic and years of Brexit-related uncertainty to drive activity in London. (The UK. and the European Union reached an agreement on the details of Britain’s departure last week.)
“Everyone’s got such Brexit fatigue, they’re getting on with their lives now,” Mr. Bikhit said. “We’re seeing activity across all price points.”
For buyers considering any of these cities, this all means that waiting is no longer a winning strategy, and, as Mr. Bikhit put it, the best time to make a move may be “as soon as possible.”
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Finding Areas of Opportunity
Every city’s market has its nuances, and while certain neighborhoods or housing types are currently seeing robust demand, there are corresponding areas that are oversupplied or overlooked, and may provide an opportunity for savvy investors ahead of spring.
In Austin, while buyers flock to waterfront and country club properties, the condo market is currently in a pandemic-related lull.
“Condos are a good buy right now in comparison to the rest of the market, I know people who are considering buying them as investments, because we do expect that market to go back up,” said Dara Allen, a Compass agent based in Austin. “That was a huge part of the Austin market for a while, and after Covid hit, [condos] went down. There are some great purchases because there is a lot of inventory in the downtown market, and more to come.”
Both London and Miami are seeing a similar trend as condo sales have yet to catch up to the red-hot demand currently seen in the mansion market.
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“The condos have come back, but they took a big hit,” said Riley Smith of Berkshire Hathaway HomeServices EWM Realty in Miami. “But now that the market for houses has gone crazy, we are seeing people go back into the condo market a little bit more.”
Likewise in London, there are many options when it comes to flats in large buildings and not as much competition.
“The more flexible you are, the more opportunity there is,” Ms. Friis said. For buyers willing to take on a construction or renovation project, she added, “you’re getting exactly what you want, and may be getting into an area where you were otherwise not able to find anything. It’s a way to get into that location you really wanted.”
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No Signs of Slowing Into the New Year
While most current buying trends are a clear response to the pressures and lifestyle changes of the pandemic, they won’t necessarily abate once more of the population is vaccinated.
“I definitely see [current demand] continuing,” Mr. Marr said. “Maybe it would be different if everybody’s vaccinated, the office is open, everybody’s going back. Because this is dragging on through the middle of next year, a lot of major tech offices have no plans to invite workers back en masse until the summer.”
“The longer people work from home, the more likely it is someone they know will have moved, and they think, ‘Maybe I should, too,’” Mr. Marr added. “Through most of next year we’ll continue to see an outpouring of people” into secondary markets.
price growth may ease up slightly, but is likely to stay on a steady upward trajectory. “In the absence of mortgage rates continuing to fall by another percentage point, price growth will likely slow down from double-digit growth to maybe 8%,” Mr. Marr said, referring to the U.S. median home price.
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And between pent-up demand and activity from buyers who may be waiting until the new year to enter the market, competitive buyers and investors shouldn’t wait to start their searches.
“The first week of January will probably be the optimal time to try to do something competitive,” Mr. Bikhit said.
Stateside, iIt’s a new year, a new administration is going to come in, the world is not coming to an end, the stock market is still strong, there’s little fear of interest rates rising,” Mr. Smith said. “That’s going to keep us busy for the next six months.”
Ms. Allen added, “I’ve seen a property that somebody was going to list for $25 million back in August, and now the new price is $29.9 million, and it will probably sell for that. Get into the market and hold, because you’re going to make money.”
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