This year has been a rollercoaster for every industry. With global economies expecting to shrink significantly throughout the end of the year, it’s the best time to take stock of what real estate can expect as the year closes. By figuring out what will happen and taking expert investors’ opinions into account, real estate agents can seize opportunities they might not have seen themselves.
But with a year this dire, what can we expect for the latter half of 2020? We asked 15 entrepreneurs from Forbes Real Estate Council their opinions on the current state of the market and what they expect to see in the closing half of this year. Here’s what they told us.
Members of Forbes Real Estate Council share their predictions for the industry in the latter half of the year.
Photos courtesy of the individual members.
1. Demand For Housing Will Remain Robust
I expect demand for housing to remain robust as millennials and baby boomers power through to keep the economy moving. Many homeowners will fall behind on their mortgages, creating distressed property sales. As developers assemble and develop new homes, old architecture and decaying mechanical systems in 1960s, 70s and 80s homes will be replaced by a new home revolution. – Gary Lanham, Gary Lanham Group
2. Home Sales Will Get Closer To 2019 Levels
Existing home sales will return closer to levels seen in the second half of 2019. White-hot summer activity due to pent-up demand will work its way through the system and pandemic-inflicted economic challenges will come home to roost. – Craig Cheatham, The Realty Alliance
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3. Refinance Demand Will Continue
We’ll likely see the flood of new refinance demand continue while ongoing Covid-19 fears will force mortgage originators to shift most of their process to being fully digital. This means that getting and closing on a mortgage will finally start to become more of an instant experience for consumers, mirroring other industries like groceries, prepared meals, transportation and even medical care. – Max Simkoff, States Title
4. Substantial Increase In Foreclosures
There will be a substantial increase in foreclosures, short sales and bank-owned properties. This will happen toward the end of the year and the beginning of next year as banks start foreclosing on delinquent mortgages. – Lex Levinrad, The Distressed Real Estate Institute
5. Remote Work Will Affect Home-Buying Decisions
The ability to work remotely will weigh heavily in home-buying decisions over the next six months. Remote work expands a lot of buyers’ geographic options and influences the features buyers are looking for. Unsurprisingly, home offices are becoming more important, but our research shows that people are also looking for a quiet location, an updated kitchen, a large backyard and an open floor plan. – David Doctorow, Move, Inc.
6. Mass Adoption Of Tech To Limit Human Interaction
Covid-19 is speeding up the mass adoption of technology in order to limit human interaction. We’ll see the real estate space increasingly implement tools like keyless entry systems, voice-activated appliances, etc. to minimize anything face-to-face or anything that requires physical touch. This also includes using automated messaging solutions to send emails noting amenities in-property, check-in instructions and more. – Vered Schwarz, Guesty
7. Virtual Tours With Human Guidance
Virtual tours are here to stay. Although there’s clearly a shift in consumer behavior toward a more digital homebuying experience, the human element remains a critical piece. The vast majority of buyers, especially those in higher price ranges, want to see a home in person—with the guidance of a skilled agent—before they put in an offer. – Adam Contos, RE/MAX Holdings, Inc.
8. Capital Reallocation Between Real Estate Classes
We expect capital reallocation between real estate classes and a surge of capital deployment for multifamily and industrial assets. These classes have shown their resilience and weathered the storm of Covid-19 well, and should attract capital previously designated for retail and office. Couple this with the low-interest rate environment and we’ll see a wave of deal activity the second half of this year. – Carlos Vaz, CONTI Organization
9. More Preferred Equity Fund Offerings
I see more preferred equity fund offerings. Investors are more risk-averse in this environment and are interested in higher fixed income with lower risk. Multifamily apartment operators are seeing new tighter lending restrictions with Covid-19 limiting their ability to finance deals. More funds are coming out of raising capital from investors to fill the gap by providing the funding for preferred equity. – David Thompson, Thompson Investing
10. Class B Multifamily Properties Will Remain Solid
Class B multifamily properties will remain solid with stable cap rates as occupancy and around 95% of rent collections nationwide remained high during Covid-19. Class C properties and workforce housing naturally has more exposure to Covid-19 implications as many tenants work in the service industry. Hence, I expect Class C prices to slightly drop, especially those with delinquency issues. – Ellie Perlman, Blue Lake Capital LLC
11. More Opportunity To Acquire At A Discount
The end of 2020 will likely see certain sellers willing to accept a lower price for their assets. While some owners will hold on and weather the storm, others will no longer want nor have the flexibility to wait and will decide to liquidate their holdings. This means investors on the buy side will have an opportunity to acquire assets at a discount from their current price. – Todd Sulzinger, Blue Elm Investments
12. Commercial Real Estate May See A Slowdown
While residential sales remain strong in many markets, mainly due to the still-pent-up demand for inventory, commercial real estate may see a slowdown. With more and more companies allowing or even insisting employees work remotely, a rise in commercial vacancy rates is a distinct possibility. – David Bolinger, The McDevitt Agency
13. Warehousing Market Will Continue To Grow
The industrial warehousing markets will continue to see growing demand as warehouse users look for distribution and last-mile delivery locations near major population centers. In many areas, office markets will be in a holding pattern due to changing Covid-19 guidelines and mandates of local and state governmental officials. – Josh Gopan, Simone Development Companies
14. Growing Interest In Suburban Or Rural Living
Right now, homeowners are adapting to a new lifestyle and realizing what doesn’t work in their current home. The global shift toward remote work—and lack of commute—may cause homebuyers to reconsider suburban and even rural living. They’ll also desire more square footage and outdoor space, which is more readily available and affordable in suburban and rural areas. – Jennifer Anderson, Anderson Coastal Group
15. More Interest In Properties With Fitness Amenities
With people spending most of their time at home, the value of on-site dining, fitness and leisure options in multifamily properties has never been greater. As leases expire during the second half of the year and renters seek new apartments in which to live, work and stay entertained, people will be drawn to properties with amenities and easy access to outdoor activities like parks and beaches. – Salvador Garcia, MAS Development Group