The 2021 Outlook For Real Estate Investors


What’s in store for real estate in 2021? What does it mean for investors?

The new normal is still evolving. Though with the election mostly out of the way, and residents determined to get back to work to make things happen, there are some pretty clear trends investors can count on over the next 12 months.

Overview

The main themes of 2021 seem likely to be much the same as 2020. The difference is that we can see it coming. The old cliche of “hindsight is 2020” is very literal and applicable here.

We can expect more chaos, chiefly led by the recent presidential election and expected handoff of the white house in January, as well as COVID related lockdowns and the virtualization of business and daily life.

It’s going to be okay. Though like Wayne Gretzky is famous for saying, it is about skating toward where the puck is going.

So, how can we expect these things to impact real estate?

Interest Rates

Considering the recent dings in real employment and economic output, the fed would typically be lowering rates. Yet, a variety of increased risks for lenders and a new government administration may actually cause rates to slightly increase instead.

Taxes

America is bracing for a tax tsunami through the first 100 days for the new presidency. A variety of politicians and local government agencies seem to be giving themselves big salary bonuses, in addition to all of the other taxes already set to be instituted, this money has to come from somewhere. Probably state income tax, property taxes and sales taxes. Investors will have to find ways to deal with this, including pricing these costs into asset purchases and the offers they make on them.

Demand

There has been no shortage of demand for real estate. That is unlikely to change in the near future. Well priced properties have been selling swiftly. Big shifts in where people want to live will continue to drive more transactions among rentals, home sales, and commercial property. Investment in real estate also continues to rise. Many big CEOs are cashing out of their tech and pharma stocks. Much of that is going to be diverted into real estate. Just look at Jeff Bezos who just sold another $3B in Amazon stock. The second time in just a few months. Pfizer’s CEO also sold a sizable amount of stock on announcing a vaccine. More celebrities are turning to house flipping as their normal businesses shrink, like Tommy Hilfiger.

Rents & Sales Prices

For now both rents and property sales prices seem to be taking a K shaped trajectory. Cities and urban areas that people are fleeing and which have been hit hard by crime are seeing more vacancy and are likely to see prices softening. Though this in turn could create more opportunistic opportunities for investing ahead of a rebound. In the meantime the areas where people are migrating to are seeing tremendous short term interest and growth. Many have been undervalued for a long time. How long this lasts will greatly depend on lockdowns and crime rates in cities.

While some returns have been tempered by eviction bans and business interruptions as the world catches up to technology and the new virtual economy, this should even out in the second half of 2021 and as investors restructure portfolios.

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