The pandemic has changed many Americans’ lifestyles. This often means migration. The resulting population changes need to take into account how buyers and borrowers plan for the coming months. Rising interest rates and inflation have begun to slow the pace of many real estate markets, but former city occupants may return to major city centers and be flooded with new occupants, fueling demand and competition. there is. Also, the rental market is accelerating, despite declining sales in some places, which can affect some renters buying their first home.
In the early days of the pandemic, migration occurred in many large cities as residents decided to flee to their villas or relocate permanently. Currently, some of these same urban areas are experiencing an influx of new buyers and borrowers, with New York experiencing the most dramatic fluctuations. Cities, especially Manhattan, are recovering after the first decline in population, According to Bloomberg.. The impact of this population growth is felt most serious in the leasing sector, with median rents in Manhattan reaching $ 4,000 per month for the first time in May this year. Douglas Elliman was found..
On the sales side, inventories remain low, even if the borrower feels the pain of rising interest rates. Brokers in cities such as New York and San Francisco are in demand as more people return, even though rising prices and competition are not moving at a much more enthusiastic pace than in 2021 and early 2022. I expect it to continue.
“In the first year of Covid, people left in a flock. A young couple who were planning to move to the suburbs within five years accelerated those plans,” said a compass broker in New York. One Kimberly Jay said. “The rental market has been hit much harder than the sales market, and now we are seeing a complete reversal.”
Rent surge — this is also a major factor in Brooklyn and Queens, with a median average rent Increased by 18% and 20.5% From May 2021 to May 2022, according to Elliman figures, each may fuel sales demand in the coming months.
“The mortgage rates are slowing the market, especially at low prices, but the rents are so high that you might start thinking that you should buy an apartment if you can,” Jay said. ..
In San Francisco, where the population declined more rapidly than any other city in the United States6.7% from April 2020 to July 2021— Much of the migration was related to the rise of telecommuting policies, said Mike Schwartz, a broker at an agency in Northern California.
Despite this decline, he expects prices to continue to rise due to supply shortages.
“We still have a million homes bright on what a normal active inventory is,” Schwartz said. “There are still basic facts about supply and demand.”
How Population Changes Affect Real Estate
There were undoubtedly immigrants from major cities after the pandemic, but some analysts claim the story of “mass spills” was exaggerated. For example, Newyork and California experienced a gradual depopulation of 1.1% between 2018 and 2022, well before the outbreak of Covid. Placer.aiBased in Los Altos, California.
And many of the New Yorkers who left the city during the pandemic may have left only temporarily and are now back.
“Many people left during the pandemic, but they left everything and didn’t sell. They planned to go to the villa, but there was no problem maintaining the apartment,” Douglas of New York said. Elliman’s broker, Daniela Sasun, said. “A year or two later, people on their way to college don’t need big apartments, so they buy and sell a little smaller ones.”
She added that foreign buyers are also on the rise, fascinated by the relatively good deals Manhattan had to offer after the Manhattan sales market was first hit in the early days of the pandemic.
And for ex-city residents who have moved out and are now hoping to return home, there is a particular need for smaller units to be used as Pie a Theres, even on a part-time basis.
“I left during the pandemic and saw a lot of happy people in Florida, but I want to have roots in New York,” said Jay. “They are looking for something smaller or are getting rentals and testing the body of water.”
Brokers who have worked in New York throughout their careers have seen similar immigration patterns in the past and say that they will eventually continue to be the preferred place to live in New York.
Frederick Warburg Peters, President of Coldwell Banker Warburg in New York, said: “People realize that whatever their tentative choices they made weren’t as happy as they were in town. They want to come back and that’s the main impetus.”
San Francisco migration is different from New York migration. This is primarily due to the continuation of remote work policies in technology-centric cities. Many of the inhabitants who have left have not yet returned, as they can continue to work from other, more affordable locations.
“Exodus is not as much a Covid phenomenon as the opportunity to exercise the ability to work in remote areas,” Schwartz said. “People who were paying very high rents or owned condos flooded the surrounding areas such as East Bay and Napa. I haven’t seen them come back yet.”
However, this does not correlate with lower selling, rent and sales costs.the town’s Median selling price is $ 1.7 million, Increased by more than 10% from May 2021 to May 2022. Inventories in the region remain tight and continue to drive price increases.
In South Florida, where there was a large influx of buyers spurred by a pandemic Demand is still fierce.. Local agents expect migration to continue as large companies open their headquarters in the area, attracting new residents to Miami and the surrounding suburbs.
“We are still seeing a fair amount of promises and growing interest. [Francis X. Suarez] Very tech and those companies are here. This isn’t just about the upcoming bubble, “said Douglas Elliman’s broker, Darin Tansy, in Miami. “The selling price has risen significantly and the number of rentals is much higher.”
Outlook for the coming months
Forecasting real estate market conditions in the coming months depends more on economic factors than on population changes. For example, rising interest rates and inflation have the effect of cooling demand, and sellers are not expected to gain an edge.
However, inventories need to remain tight, especially as buyers who bought real estate during the recent boom are unlikely to sell for some time.
“With rising interest rates and lower mortgage applications and demand, buyers have a little more control,” said David Parnes, a broker at the Los Angeles agency. “But inventory is still tight because people who bought a few months ago were locked at a high price and had to compete to get the property, so those homes won’t return to the market right away. . ”
But even if interest rates rise, brokers point out that they are still at historically low levels. Also, in cities like New York, soaring rents may lead some residents to buy instead.
“People are looking for a rent, but they find it very expensive,” Peters said. “Given that this is a flexible moment for sellers, we need to start thinking seriously about whether it’s a play worth buying.”
Buyers with a long-term view will find that real estate is still a good investment in the current flow of migration, interest rates and inflation.
“The market will be bumpy in the next few years, and real estate is a hedge,” Sasun said. “There are ups and downs, but the line of time is stable. Newyork is always in a market with the advice that if you buy and hold real estate for 5-6 years, you can cover the cost and make money. did.”