The Covid-19 pandemic that is currently sweeping the US has triggered major changes in several industries. Major companies that have, until recently, required that the majority of their employees physically come to work are currently looking for new ways to decentralize their workforce. Whether this means that they allow employees to work from home or that they outsource to other cities and states throughout the US, companies are redefining the modern workplace.
As more and more individuals are allowed and even encouraged to work from home, the need for traditional workplaces has been reduced considerably. This has resulted in an overall reduction of demand for office buildings, however, it has also changed the real estate market in an unprecedented way.
A pandemic that reorganizes rental priorities
Individuals are now looking to rent single-family homes in areas that have low population densities, but that offer other facilities. These include convenience stores, parks with large open areas, parking spaces, and others.
In other words, a growing number of individuals are now looking for small, affordable homes that are situated in quality neighborhoods that offer all the facilities that would be required for a single-family home lifestyle.
Major changes in the real estate market
This shift in the priorities of employees has also brought about major changes in the real estate market. The rise in consumer demand for rentals situated in more isolated areas such as the South and Southwest is likely to continue.
From a financial perspective, the Single-Family Market Index was at 63 in the first quarter of 2020 and has climbed to 76 during the second one. Anything over a score of 50 is considered an expansion of the market, while the readings that are under this value indicate that the market is contracting.
It is also important to mention that the national median rent in the second quarter of 2020 was $1,602, which is good news for renters. However, this value is expected to grow in the next 6 months and possibly after that.
The pandemic is changing the future of rentals
These somewhat recent changes in the real estate market are considerable and mark a serious shift in rental opportunities. Furthermore, as employers are slowly adapting their infrastructure to the new global the current rental trend will continue. Most major real estate players expect that individuals will focus on finding homes away from busy urban areas for another 2-3 years.
What does this mean for renters?
The newly developed demand for single-family homes is essentially a new trend. Properties that match the new demands of renters are currently relatively affordable, however, this is expected to quickly change. This is partially because the single-family homes that are situated in quality neighborhoods will slowly be occupied, leaving only those located in areas that lack various facilities.
However, the biggest expected cause for a price increase is the fact that individuals are seeking to rent homes for much longer periods. This will make the market more static and further increase the price of quality properties.
This having been said, the demand for single-family properties is also expected to grow as a result of the decreased home ownership need of many individuals. For many, it is currently much more profitable to live in rented homes their whole lives than to take out a mortgage, but this too is expected to change as people become less worried that they might lose their jobs.
Overall, the prices of are expected to grow, which means that those who are currently looking to rent will have to either look for single-family homes from more isolated neighborhoods or move fast and secure one of the properties that are located in great areas.
How long is this trend expected to last?
The surge in single-family rentals is considered to have been caused solely by the Covid-19 pandemic, however, analysts argue that this trend may continue even after the crisis is resolved. While the changes that triggered the need for this type of property are a direct result of the pandemic, they are expected to be maintained long after it is over.
Is it a good time to buy properties?
The real estate market trends are dictated by the majority of potential buyers and sellers that are part of it. In other words, polls and indexes are needed to determine if it is a good time to sell or buy homes. For this purpose, we have Fannie Mae’s Home Purchase Sentiment Index, which is created from the surveys with a minimum of 1,000 participants.
While the index reached 77,5 points in August, it is still 16.3 behind the value that it had one year ago. However, the score has grown by 3,3 points when compared to July, which indicates that individuals are more likely to buy a property.
It is believed that the increase in purchase sentiment is a direct result of the considerable reduction of mortgage rates. The last consumer sentiment survey has also uncovered that individuals are less concerned with the possibility of losing their job. This is in line with the current trends of the job market that shows the fact that most jobs are more stable since employees have been allowed to work from home.
Overall, this new trend in rentals will likely last for at least another six months, however, it is probable that it will not end with the pandemic. Companies are making permanent changes to their infrastructure which may result in permanent jobs that can be done from home.