Matthew Gardner, the Windermere Real Estate Company, gave our company his thoughts on the Economy and the Real Estate Market this week. The summary of his talk is below:
- Currently the economy is declining a bit and as expected due to Covid. We have recently seen declining jobs numbers which funnels to declining spending. However, Matthew predicts that once the vaccine really hits some large numbers of distribution, we will see people heading back to work and spending will then increase. Both increased jobs and spending are good things for our economy overall.
- The move from larger cities to the suburbs and smaller cities is real. However, Matthew does think that once the vaccine has been distributed that many workers will only part time work from home and then also part time go into the office. For this reason, he sees many people not moving too far away from their primary place of employment.
- In the apartment market, we will see declining rents in the larger cities as people leave the city and as they can afford to purchase homes outside of the cities. Also, the larger cities may be a bit overbuilt this year as 400,000 new units are supposed to come on line. Developers will probably turn their attention to building in smaller cities as a result.
- Luxury housing performed incredibly and surprisingly well this past year. This segment is expected to do well again in 2021. Reasons are that jumbo interest are very low and with the increased flexibility of work locale, people can choose to get more value and also move to locations with lower tax rates. Matthew also thinks we will have more foreign buyers in 2021.
- Zoning overall will see more commitment to increased land being sold to developers who will build affordable housing. Many cities and town are facing a pretty substantial decrease in tax revenue and they cannot allow employers to leave because workers can’t afford housing.
- Adaptive reuse will gain some traction particularly in hotels, malls and strip malls being converted to residential or mixed-use developments. Matthew thinks that office buildings are tougher to reuse due to core construction and the difficulty of dealing with additional infrastructure such as plumbing needed for residential.
- Home features that are now important in the post Covid world – more space, separate offices, dedicated zoom space, high speed internet. As a result, new home sizes will be growing.
- Mortgage forebearances. These are not going to turn into foreclosures at a super high rate. Many (maybe most) people will have enough equity in their homes that they can sell if they have to and keep their equity. In some markets, particularly larger cities, the condo market may be the exception to this.
- Mortgage rates are incredibly low right now. We have had 16 record lows over the past year. Matthew thinks that they are about as low as they are going to get and as 2021 wears on, they will rise but conventional rates shouldn’t go much higher than 3.1%.
- In 2021, Matthew sees home sales continuing to increase (about 7.5% is his prediction) but home prices will increase 4.1%. He thinks we will have more inventory which will help to keep prices from skyrocketing. He sees a large amount of first time home buyers entering the market, particularly if Biden is successful in passing the first time home buyer credit as part of his economic package.
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Windermere is very fortunate to have a full time, renowned economist on staff. Matthew is often asked his opinions from economic and government leaders. I trust his words.
If you’d like more information or to discuss further, please reach out to me at 406 499 4218 or firstname.lastname@example.org.