To say 2020 was a surprising year in the real estate markets would be an understatement. In March, it looked as though we’d be looking at economic malaise, but, the real estate markets remained extremely resilient. Home Sales Up, Prices up. Additionally, the commercial markets didn’t see the reckoning that was expected when the Pandemic broke in March 2020, but it remains to be seen what the long-term lockdowns and business restrictions will do to occupancy and property values in the future.
So, how is 2021 shaping up in the Twin Cities?
Housing Inventory remains low, which fueled by low interest rates will likely continue to push housing prices up. However, there are some foreclosures starting to happen, and the inventory and pricing impacts of distressed sales will likely start playing out at the end of the first quarter or beginning of the second quarter, so it is very hard to say what the make up of the inventory will be in spring market.
Economic Impact on the Market
The inventory and type of inventory will have a direct impact on pricing. If a larger crop of foreclosures hit the market, prices may flatten. Nationally, the National Association of Realtors® is anticipating an increase in annual median increase of 8.0%, however, this is being driven by strong forecasted gains in top national markets; Dallas/Ft. Worth, Phoenix, and Indianapolis to name a few (National Association of Realtors®). The consensus for the Twin Cities is a more modest price appreciation in the 3.0% range.
While Minnesota’s overall unemployment remains low, certain sectors have been hurt badly; hospitality and main-street retail in particular. The rebound, or lack of rebound of these sectors will have a huge impact on local real estate markets. Corner stores, restaurant, and hotels are not currently operating at pre-pandemic levels and the visibility on when they will remains cloudy. Employees and employers in these sectors will continue to lack confidence in their economic status; and will lack that confidence until they feel secure in their ability to be open. Vaccine availability will hopefully start to create some visibility for these businesses, but Minnesota’s rollout has been slow.
Impacts of Remote Work on the Market
During 2020, there was a significant move away from the Cities and into more rural settings. This phenomenon may be the one to continue to watch in 2021. Are people going to be working from home/remote more? Will professionals seek homes with better home offices and more space? Or, was that a temporary reaction to what was 2020? Will major employers continue to endorse this phenomenon? Do they feel employees are productive enough in a remote location? Or, will they start requiring employees be back in the office in a more traditionally supervised setting?
Lots to keep an eye on in the first half of 2021.