Real Estate Market Predictions for 2021 by kim kiyosaki

Real Estate Market Predictions for 2021

There are 6 important things to think about when investing in rental properties this year

Is one of your 2021 New Year’s resolutions to finally dip your toe into the real estate investing pool? Or do you already have some investments and are wondering what’s in store for the industry this year? As you can imagine, given my own substantial real estate investment portfolio, I’ve been keeping a close eye on various reports and predictions for 2021.

6 real estate market predictions

Here’s a brief recap of some of the information I’m seeing, as it will help all of us make more informed decisions when it comes to evaluating new investment opportunities this year:

  1. Record-breaking low mortgage rates

    While the ongoing pandemic certainly isn’t good news, it is continuing to make for some favorable real estate investment conditions as it relates to mortgages.

    Last year, rates for a 30-year mortgage in the U.S. tumbled to the lowest on record — and then went on to set more than a dozen “record lows” throughout the year. Just last month, it bottomed out at 2.67 percent — the lowest rate ever since Freddie Mac began tracking mortgage rates in 1971.

    And this year looks pretty darn good. As I write this blog, the average contract interest rate for a 30-year fixed mortgage sits at 2.88 percent. It’s also the perfect time to refinance any current investment properties (or your primary residence) and get a less expensive loan — in fact, mortgage refinance demand spiked 20% last week, as homeowners and investors realize this might be their last chance to snatch up a record-low rate.

  2. Real estate inventory shortage

    Look around — are you seeing new residential housing developments going up? Probably not very many. Inventory of homes remains low this year (just like 2020), as increased costs of labor means a lack of new housing projects.

    According to the Forbes article, “Want to Buy a House? Good Luck Finding One,” by the end of December, the number of homes for sale had slipped below 700,000 for the first time on record. There are now 41% fewer homes on the market than this time last year.

    So what’s at the root of this real estate inventory shortage? It’s party due to the housing crash over a decade ago — many homebuilding companies went under. And what little building is going on, is geared toward the higher-end housing because the margins are more attractive, leaving millennials and other first-time homebuyers priced out of the market. Simply put, there aren’t enough new housing options to keep up with the demand, and this is leading to rising housing costs.

    Of course, the other reason is the pandemic — a lot of homeowners are playing a “wait-and-see” game and hesitant to make a move. Plus anyone who lost their job recently may have a tough time qualifying for a mortgage, which will also keep them from moving.

    With such a low home inventory, you may have to lower your expectations of what you’re looking for or be prepared to shell out more money than you were planning to in order to purchase real estate. Even then, expect bidding wars thanks to the increased competition. Finally, make sure you have all your ducks in a row for financing ahead of time — you’ll likely have to make an offer the same day you see a property to have a shot at purchasing it.

  3. Suburbs on the rise

    Last year, I reported that with housing prices rising in major cities, many people were having to bite the bullet and move out to the ‘burbs. I also mentioned that tech companies were starting to move to secondary markets where millennials could afford to live.

    But now that so many employers have switched to a remote work model in light of the pandemic — and many plan to continue this practice long after quarantine ends — it may no longer matter where you live at all. Thus, we’re seeing a mass exodus out of ultra-expensive cities like San Francisco in favor of more affordable cities like Phoenix and Austin.

  4. Great rental market

    So what happens to all those people who can’t afford to buy a new house because of rising costs and lack of inventory? They rent, of course! This positive rental market is great news for landlords, as there won’t be as much concern over vacancy.

  5. Attract renters with amenities

    One way to attract new tenants to your rental property is by choosing your amenities wisely. Renters are looking for upgrades like keyless locks, smart thermostats and doorbell cameras, open floor plans, stainless steel appliances, in-unit laundry, media rooms, secure parking and online rent pay. You’ll want to explore these options, checking out competitors in your market, and then decide what will attract the right renters to your investment property.

  6. There’s a new administration stepping into office, so all bets are off

    Now, a quick word of caution: my real estate market predictions for 2021 could be affected by the ongoing pandemic and the fast-approaching change in administration. This whole year could mean a lengthy period of uncertainty in many sectors, including the housing market. People may rely on more conservative wait-and-see approaches about the economy and their jobs. So, sales may decrease (which could open up some opportunity for you in this limited-inventory market), however pricing is not likely to follow suit.

Resources to help you dive into the rental market

Since I don’t have a crystal ball, these are merely housing market predictions based on everything I’ve read and all my experiences over the decades. Honestly, it’s impossible to say what will really happen with any certainty. That’s why it’s important to follow the market closely and become familiar with neighborhoods, city trends, and the available inventory in your town. You’ll also want to study up on real estate investing as a whole, to make sure it’s the right decision for you.

I’d suggest starting the process by reading a few of my past real estate investment blogs. I’ve selected some of the most popular ones, which cover a wide array of topics:

  1. Don’t know where to begin looking for the perfect investment opportunities? Check out How to Find the Best Real Estate Investment Deals to see where they’re all “hiding” — yes, even with this current housing shortage, they’re out there.

  2. Getting Started in Real Estatehelps you say goodbye to the dreaded analysis paralysis and say hello to the financial freedom you crave. In this blog, you’ll learn about some unexpected real estate investment opportunities (spoiler alert: mobile homes are an inexpensive option you probably haven’t considered!).

  3. In 6 Ways to Find Investing Money for Beginners, I help dispel the myth that you need to use your own money as a down payment for your first investment property (or any type of investment, really). Once you realize that money isn’t holding you back from your investment dreams, the sky’s the limit. So, if a lack of money is your excuse, don’t miss the tips.

  4. I think real estate investing is the bee’s knees, but that doesn’t mean it’s for everybody. In The (Many) Pros and (Few) Cons of Real Estate Investing, I delve into the reasons why I love it so much. But I also don’t like to sugar-coat things, so I’ve also included some of the disadvantages that may not be as appealing, depending on your situation.

  5. Too many first-time investors think the saying, “go big or go home” applies when it comes to starting out in real estate. It does not. In 3 Simple Steps to Creating a Winning Investment Plan, I encourage you to truly start small and build your confidence through first-hand experience and education.

The more you read and learn (hey, I still do it every day!), the more confident you’ll be about not only recognizing, but jumping on a great real estate investment opportunity the moment one comes your way. And if my real estate predictions for 2021 are any indication of how things will play out, you’ll need to jump fast.

Original publish date: January 31, 2019