U.S. Real Estate Predictions

Heck of a year, to say the least. In the interest in brevity, let me keep it short n’ sweet. Here’s my 2021 predictions.

The Plague
The very obvious question is if there will be a negative impact on real estate because of the Covid-19/Coronavirus. Short answer, Yes. Long answer, Yes again. This especially so in the shopping center retail space. Restaurants are dependent on the residual income of an affluent society. America is an affluent society. The per capita for nearly every societal accoutrement is off the charts. The overabundance of restaurants, gyms, spas, grocery stores, and even tire repair shops pale in comparison to other societies, and even Western Democracies. Ergo, America has suddenly realized it doesn’t need as many restaurants as it thinks it needs, when you consider eating at home is more economically sane – in a time of uncertainty.

My informational sources, such as quarterly reports from Deloitte & Touché and the CCIM (Certified Commercial Investment Managers), all indicate that office space (for very obvious reasons), retail, multi-family are in for a rough patch the next 18 months to mid-2022. But for industrial and warehouse space, life is exceptional great. The need to stockpile resources and provisions for consumers is fairly apparent.

On a miscellaneous note, home sales – which is not connected to commercial real estate, but is residential real estate, is doing exceptionally well. This robust disposition is a result of many Americans with abundant resources (and job stability), that enables the purchase of homes and/or an upgraded home. This is also part-and-parcel in a fear of raising interest rates; the need for ownership, personal space and solitude; and likely a bunker mentality – wherein existentially some fear that hordes of people will desperately roam for food in a Dawn of the Dead fake realism (and from the overload of cable news) – but superficially there is no threat, but only in one’s own psyche. It’s important to keep in mind, that despite the chaos, the unemployment rate is still only 6.7% as of November 2020.

Interest Rates
As I correctly predicted last year, rates hit a new low, spurring an increase in market activity. Based on the economists’ predictions I’ve read for 2021 – because there is some dissension within their mindsets, interest rates will fluctuate back and forth, but should be about a fifth of a point lower then where they were at year end 2020. That calculates to about 2.90% for the 30 year fixed rate.

Sellers’ Market
In most localities in the US, it will be a Sellers’ market, which has an inverse relationship with demand. Meaning, when you have higher buyer demand, it will result in an increase in house prices, which will result in a Sellers’ market.

Broker Productivity
This revelation is actually dear and near to my heart, given I was previously a commercial real estate broker dating back twenty years ago before I started to buy homes on my own account. The fusion of technology for residential brokerage has been in the making for a long time and will see a more efficient – perhaps proficient as well, number of brokers emerge as the number of closed transactions is expected to increase in 2021. This is due in part as a result of technology advances. As a contrast, in 2019 the average number of sold homes per residential brokerage was 50.7 homes. In 2021, there is expected to be marked improvement on that number, with in addition the average broker taking less time to close transactions.

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