Now that the global pandemic has been with us for a year, which trends started in 2020 that will continue to affect the real estate market in 2021? Particularly for wholesalers, what insights should you take away from the situation? How can you adjust and take advantage of new opportunities brought about by the lockdown?
Being in a dynamic industry, where the only thing constant is change, the key to wholesaling success is to spot market trends early, extract relevant insights, and adjust the way you conduct your business.
In this article, you’ll find five important real estate trends for you to keep an eye on if you want to pivot with the landscape and remain successful in wholesaling real estate in 2021 and beyond.
5 Real Estate Trends and How it Affects Wholesalers
While the list below is by no means comprehensive, we see five important changes that happened in response to the global pandemic. Let’s discuss what they mean for wholesalers and the real estate industry as a whole.
1. Work-from-home is now mainstream.
With stay-at-home orders and social distancing rules, many office workers have been working remotely for nearly a year now, and most have settled into this new normal. What does this mean for wholesalers?
- Many office leases are not being renewed.
- People living in expensive homes close to offices are excited to relocate to the more affordable suburbs.
- Vacation towns are now becoming an option for permanent residency. People are tired of big, populated cities and are seeking new places with more freedom and space on offer.
Wholesaler Action: you may want to pay more attention to rural areas, where there is an increased demand from buyers—these are the areas that most office workers couldn’t consider prior to the pandemic, but now can.
Don’t wait until competition becomes fierce! Take the lead and meet the high demand before other investors swoop in.
2. People want an upgrade from their current home.
Working from home and having less social interaction with the outside world also means that people are investing more in their homes now. They want larger houses and backyards, more rooms and privacy, and bigger patios and storage spaces—especially if they have children.
Families (and people of all ages) are now willing to invest serious money into creating a comfortable home, more than they ever were prior to COVID.
Wholesaler Action: This means that wholesalers need to pay heightened attention to the features of a home and think about whether or not they will be attractive to remote workers, homeschooled children, and folks who want plenty of leisure space when stuck on the property.
Think of the homeowner’s needs and preferences, many of which have evolved with the times.
3. More people want to purchase homes.
After the record-breaking low interest rates in 2020, the forecast for this year is still a relatively stable and low interest rate. It doesn’t take a genius to see that we still have a long way to go before the economy improves, which means that interest rates are unlikely to move much higher within the year. Additionally, the Federal Reserve has declared that rates won’t be raised through 2023 to support economic recovery efforts.
For the real estate industry, lower rates mean lower payments, which means buyers can afford higher purchase prices. So, it’s an attractive time for people to buy a house (or two). Think about it this way: a $300k loan at 3% is almost the same mortgage payment as a $200k loan at 6%.
Wholesaler Action: For wholesalers, this means it’ll be harder to find and secure properties that are below market value. However, this also means that the properties you do acquire will sell quickly and for a higher price.
4. Housing inventory is low.
Due to COVID being easily transmitted, many people have put off selling their houses simply because they don’t want to have strangers in their homes. This increased competition within the housing market, with people snatching up the few available houses at lightning speed—even if they’re priced at top dollar.
Wholesaler Action: This makes it harder for wholesalers to secure deals at a discount, but it makes it easier to exit deals with a much higher profit due to larger spreads. In other words, it’s a good time to put in the extra time and energy in securing good deals and making up for it multiple times more at exit.
5. The housing market likely won’t crash.
Contrary to what others might predict, due to the housing shortage and skyrocketing home prices, the possibility of a market crash is quite low for the moment.
Unlike the infamous 2008 crash, this time around lenders did not allow homeowners to extract their equity via home equity loans or other methods. At the same time, appreciation and lenders doing smart loans have created incredible equity for homeowners. This means that, even with a struggling economy and high unemployment, it’s highly unlikely that we’ll see a wave of foreclosures.
For example, let’s say someone loses their job and can’t afford to pay their current mortgage payment anymore. However, they do have $200k in equity in their home. Will they walk away from their property and let it go to foreclosure? Or will they sell it and try to get as much of the equity out as they can? The obvious answer is to sell, of course!
When a door closes, a window opens—and early adopters will reap the most rewards.
As long as there are people who want to buy their own homes, there will always be wholesaling opportunities to assist the buying and selling process.
Choosing to not capitalize on the current situation out of fear is a losing strategy. As the famous saying by hockey Hall of Famer Wayne Gretzky goes, “You miss 100% of the shots you don’t take!”
So, keep searching for the right opportunities, and you’ll continue to be successful in any circumstances. Besides, real estate constantly fluctuates, even without a pandemic – so think of this as just another one of the industry’s lovely challenges.
Any important wholesaling opportunities we missed?
Image courtesy of Marcello Chagas