The economy was healthy until a few months ago, but COVID-19 changed that pretty quickly. Over the past few months, some internet- and service-related businesses thrived, while many companies — and even industries — either slowed significantly or came to a complete halt. Sadly, the unemployment rate jumped from 4.4% in March to a staggering 14.7% in April. But what does all this mean for the future of real estate?
It’s tough to predict housing market trends due to our ongoing circumstances, but experience and current indicators can shed light on some of the possibilities.
Possible Winner: Residential Real Estate
Several variables will affect home sales following COVID-19, most notable of which is the reaction of the job market once people return to work. If the unemployment rate continues to creep upward, a large percentage of potential buyers won’t qualify for a mortgage. How these variables fall into place will determine if real estate predictions will pan out as expected.
According to a study by Zillow, Hong Kong’s economy was heavily affected by the SARS virus outbreak in 2003, but it bounced back in a relatively short period. The country’s real estate prices remained fairly stable throughout the pandemic months, but transaction numbers decreased sharply; however, once the crisis ended, real estate sales in Hong Kong were back to normal.
COVID-19 is hurting the United States’ economy more drastically than SARS affected Hong Kong, but that doesn’t mean it will affect the housing market trend negatively. A possible effect of people being stuck in quarantine is that it brings their housing situation to the forefront.
Many tenants and homeowners who were only considering buying a home or moving to a bigger house will now likely push to turn their thoughts into reality. Relatively low mortgage rates should also help the situation, assuming the job market rebounds successfully.
Likely Troubled Area: Office Space
Working remotely wasn’t the world’s best-kept secret even before COVID-19. In 2016, 43% of employees worked remotely with some consistency. An even more telling poll revealed that 80% of employees said they would like to work from home at least part-time.
People are more interested in maintaining a healthy work/life balance than ever. Employers gain in several ways by allowing remote work. Some of the advantages include:
- Reduced office space, which translates to lower rent and utility bills
- Employee retention
- Increased production by employees
The pandemic served as an excellent trial run for many businesses that were reluctant to allow workers to work remotely. In a recent MIT survey, more than a third of the respondents indicated they switched from commuting to remote work due to the virus.
When COVID-19 passes, employers whose companies operated successfully during the crisis will likely consider allowing their employees to continue working from home. While this might not put an end to office buildings, many business owners and corporate heads are bound to reassess their office space needs as they consider making remote work the new norm for their companies.
Probable Industry Changes
Virtual real estate — as popular as it was until now — will grow exponentially in the coming months and years. During COVID-19, realtors who use virtual tours of homes and neighborhoods in their listings are the most likely to sell a house.
With the right data and visuals, potential buyers could get a clear picture of the house they are researching. They might still need to do a quick walkthrough, but at least they’ll get to see the homes initially on their own time.
Real estate agents will likely continue to up their virtual skills and capabilities after seeing the impact that comprehensive website tools have on their bottom line. Using their site to its fullest will help them engage clients and increase their sales flow. Having access to real estate data can also help clients navigate the real estate market by providing insight into the things that really matter to them. Touring neighborhoods, points of interest, school districts, and more may be difficult during COVID-19, but can be made easier by presenting the data digitally.
Building trust and relationships with clients traditionally require face-to-face interaction, but the future of real estate will likely involve a shift to using digital tools and virtual tactics to become a trusted expert in any given real estate market.
Inman Connect 2020
If you’re in the real estate industry, all of these possibilities probably have you on edge. Every professional should be in tune with impending changes that might affect their line of work. During turbulent times such as these, it’s crucial for people in the industry to keep up with possible housing market trends and the future of real estate.
Inman Connect Now is a live, online event taking place between June 2–4. Thousands of professionals and vendors will gather virtually to discuss the current and future state of the real estate industry. This event presents an excellent opportunity for you to stay informed and prepared for what will come when we return to business as usual.