The housing market has a huge impact on the economic health of every region in the United States. As COVID-19 continues to affect every industry in its own way, the housing market is expected to experience a significant decline in sales. Low mortgage rates and low housing inventory may be the only things that keep home prices steady. The rental market, however, is experiencing huge shifts. Many renters have been laid off and are refusing to pay their landlords. Some states, like Georgia, have banned all vacation rentals, freeing up many for displaced homeowners.
Homes typically represent a substantial amount of a homeowner’s net worth, and when the fluctuation of the real estate market lowers their value, it can have a substantial impact on their financial state. However, it’s not just homeowners who are affected. Those fluctuations and changes in the market affect both the temporary housing and property insurance industries. It’s critical that homeowners and those who work in property insurance are familiar with their relevant markets so they can adjust their business and investment approaches accordingly.
National Housing Market Trends in 2020
According to Forbes, there are a few predictions for the real estate market in 2020 that affect both the traditional and the rental housing markets. Rising rents are continuing to encourage Millennials to purchase homes rather than rent without building up their personal assets. Spring is typically the home-buying season that realtors look forward to all year, but with the novel coronavirus outbreak changing everyone’s lives, the Spring season has started at a standstill.
Landlords across the country are finding it hard to collect rent as millions of Americans have been laid off. However, investing in rentals can still be a good investment. Eventually, the country will reopen and the housing and rental market will continue to experience an economic upturn until housing inventory catches up to the demand. This is true for both the housing and rental markets.
As of the latest available U.S. Census data, this map shows the number of vacant/occupied homes in each state. The demand for additional housing in these states will likely result in a construction boom in the upcoming years. Eventually, when housing costs become too high in those highly coveted areas, there will be a shift in the areas people are looking to move. Many companies are adapting to remote workers and the trend is expected to stick. Companies headquartered in large cities are realizing they can increase teleworking opportunities and give their employees more flexibility to live in rural areas farther from their home office. Rural areas will in time experience construction booms once inventory rises in high-demand areas.
Metro-area housing markets are continuing to become more volatile as gentrification continues to occur. More people are searching for housing options that offer close proximity to a city, where the physical space required for construction is not as readily available. Particularly around San Francisco and Seattle, where the cost of living within the city limits is exorbitant, surrounding areas with formerly affordable housing costs are growing into high-demand areas. There is a national housing shortage around the highly coveted city areas, and it’s leading to major issues with gentrification. Those communities that used to be available to lower-income households are suddenly being scooped up by high-income families. This is causing major displacement of communities that have been established for decades, and those who can’t afford the rising cost of living are forced to find alternative arrangements.
Demand is rising fast, and it’s not going to take long for measures to be necessary to prevent the uncontrollable rise in rent. Rent control, tenant protection policies, and new construction are likely on the horizon for housing markets throughout the country, especially those located around where we are seeing the highest demand. However, at this point, there is no legislation that is expected to have a drastic impact on housing markets in the US as most of the countries attention stays focused on the pandemic.
Natural Disasters and their Effect on the Housing Market
Natural disasters have a major effect on the housing market. When a natural disaster such as a wildfire, hurricane, tornado, or flooding event hits a community, the housing market is turned on its head. Residents are displaced from their homes and the demand for the remaining properties in the area skyrockets. The housing markets typically within 8 – 10 miles of a significant natural disaster tend to experience a jump in demand and price as well.
How the housing market reacts following a natural disaster may be important, as 2020 is expected to have an above-average hurricane season. Immediately following a disaster the need for temporary housing while people’s homes are being rebuilt causes rental housing markets to experience a significant increase in demand. Displaced homeowners have to maintain proximity to their jobs, family, community, and the home that is being reconstructed. Typically, after such a catastrophic and emotional event, people are not looking for the further upheaval that might be associated with moving to a completely new area, finding a new job, or leaving behind friends and family. It’s natural that people prefer to stay in their homes and rebuild their lives.
As climate change has produced unprecedented storms and disasters, renters and homeowners have had to take different approaches when they are forced out of their homes. This has led to two different demands after a natural disaster, mostly due to insurance differences. Insurance coverage varies for homeowners and renters. Homeowners insurance covers repairs and rebuilding costs, but renters insurance is a whole different story and typically only covers personal property and liability. Renters are much more likely to simply move to a new home, sometimes in a new area or new region of the country rather than wait for the repairs, as long as their lease is canceled. Homeowners are more likely to deal with contractors and the rebuilding process. This means that homeowners will be looking for temporary housing in the area they live, while renters may search a broader area.
Temporary Accommodations’ internal company database contains thousands of pre-vetted short-term rental properties that understand the temporary housing process. By monitoring rental housing markets we can preemptively work to increase the number of verified short-term rentals in high-demand markets or markets in catastrophe-prone areas. This way we can ensure that those displaced by natural disasters are able to find a place to rebuild their lives quickly and easily, with as little stress as possible.
Nothing about being displaced from your home is easy. The stress and the difficulty of dealing with the emotional loss make everything about being displaced a difficult process. Knowing how the housing and rental markets are behaving in high-demand and catastrophe-prone areas of the country ensure we always maintain optimum service levels. Having a partner in the temporary housing process helps adjusters and homeowners make smarter decisions immediately following a disaster. We know how difficult it can be to rebuild after an unexpected catastrophe, and we are here to support our clients every way we can.