As the world begins to emerge from the darkest days of the Covid-19 pandemic, it’s becoming clear that the world we’re reentering is very different from the one we left behind. After more than a year of living, working, attending school, and socializing from home, buyers’ priorities have changed. Low interest rates, a supercharged market, and rising home prices have all combined to produce a rapidly evolving real estate landscape that may never be quite the same again.
So, what does the future of Chicagoland real estate look like? Here are three pandemic-era real estate trends that aren’t going away any time soon:
1.) Trading Location For Space
During the pandemic, many of us found ourselves working in one corner while a spouse or child worked or studied only feet away. Trying to find a quiet space for a Zoom meeting presented its own challenges. Those challenges are increasingly being reflected in buyer preferences, as homebuyers look for more space and greater flexibility, indoors and out.
During the height of the pandemic, remote workers, no longer tethered to a physical office, found that they could afford more space further away from crowded city centers. Empty nesters, instead of downsizing, may have discovered that they needed even larger spaces as college students returned home for the year. And urbanites found that locked-down cities did not offer the food, social, or cultural opportunities they had once held.
As a result, research indicates that nearly 40 percent of adults living in urban areas say that they considered moving “out of populated areas and toward rural areas,” with 43 percent saying that they have actively looked online for living places outside of the city during the pandemic. The number of prospective buyers viewing homes outside of urban areas grew by nearly 54 percent year-over-year in 2020, according to data from Realtor.com — far outpacing the growth of people browsing homes in cities.
While the long-term effects of the pandemic remain unclear, it seems clear that, at least in some industries, work-from-home is here to stay. A June 2020 paper by the National Bureau of Economic Research found that 37 percent of jobs can be performed remotely, with those jobs primarily concentrated among high-wage earners. For this group, greater commute flexibility will allow them to live further from the office, and is likely to keep driving a demand for larger homes with more space for home offices, more outdoor space, and other in-demand features. Buyer activity has also been extremely robust in vacation home markets, indicating that buyers are also looking at second homes as a meaningful investment.
Buyers moving out of the city aren’t likely to want to give up on the benefits of urban living, however. Walkable neighborhoods, access to coffee shops and restaurants, public transportation, and other amenities of city life are likely to become more popular even in the suburbs, spurring a wave of development in these areas.
2.) Buyers Want More From Their Homes
In addition to opening up their search to more far-flung locations, buyers are updating their preferences about the kinds of homes and features they are looking for.
Single-family homes became more popular during the pandemic as social events moved outdoors and backyard space became more coveted. Larger lots, quieter neighborhoods, and nearby parks and walking trails are likely to remain popular with buyers. In a pandemic-era poll from Realtor.com, buyers admitted to looking for “larger homes, bigger yards, access to the outdoors and more separation from neighbors” — with 13.6 percent of respondents ranking “more and better outdoor space” as a must-have, and about 8 percent saying that they wish their home had a larger yard or patio.
Conversely, open floor plans may see a decline in popularity, with buyers who work from home looking for offices that can be closed off from the commotion of the rest of the household. Quiet, private home offices are already a sought-after feature, as buyers seek some separation between work and family time. As another marker that tastes are changing, only 43 percent of people who have recently renovated or plan to renovate their kitchen said that they were hoping to create an open-concept floor plan, according to an exhaustive report from Houzz — down from more than half of all renovating homeowners (53 percent) as recently as two years ago.
Luxury amenities like smart home technology, spa-like bathrooms, and home gyms and theaters are likely to be popular with homebuyers who are preparing to spend more time at home. These features are also popular among younger buyers, who are spurring a significant amount of market activity and reshaping the real estate landscape — with Gen Z accounting for as many homebuyers as the Silent Generation in 2019, as an example.
Buyers are also looking for more flexibility in their homes to accommodate aging family members, children returning from school, or rental units that can provide a steady source of income in uncertain economic times. As a result, single family homes that provide flexible living spaces are more popular than ever. Indeed, the prevalence of multigenerational households has been climbing for some time, with roughly one in five Americans living in a multi-gen home in 2016 — up from just 12 percent in 1980.
3.) Rising Sales Prices Are Here To Stay — For Now
Even as housing supply nosedived in the early days of the pandemic lockdowns, data suggests that prices largely maintained their steady increase. Even as mortgage rates have begun to edge upward somewhat, home prices have largely continued their upward trajectory in recent months.
Rising home prices have been driven in part by low inventory, coupled with surging demand. In an era of unprecedented economic uncertainty, sellers were reluctant to list their homes, especially when the selling process involved opening their homes to strangers. However, even as the world takes steps toward reopening, the market seems poised to continue facing lower inventory levels for a while, for a number of reasons.
According to data from the National Association of REALTORS® March 2021 Existing-Home Sales Report, nationwide inventory levels continue to sit near record lows, with roughly a 2.1-month supply of unsold inventory at the current sales pace — down from 3.3 months at the same period a year earlier, and far below the 6-7 month benchmark that has historically signified a balanced or neutral market. As a result, homes are spending less time on the market on the average, generating more multiple-offer scenarios, and fetching higher sales prices — with the nationwide median sales price up by 23.6 percent year over year, as of May 2021.
Also contributing to tighter inventory, new construction lagged a bit in 2020, with many builders slowing operations at the beginning of the pandemic, fearing lockdowns and an economic slowdown. Now, as the market continues to heat up, many homebuilders are still working to catch up to demand. However, increased construction costs, particularly for labor and lumber, may continue to put upward pressure on prices as supply ratchets up to catch up to the current breakneck pace of demand.
When Home Means More, You Need a Team With More to Offer
Home is about so much more than just four walls. Buying or selling a home is a big deal, and with everything we experienced in 2020, our homes have never been more important. That’s why your local Baird & Warner agent is with you at every step of the way, from finding the perfect home to connecting you with local experts in mortgage and title. Whether it’s the beginning of a story or the end of a chapter, we’re here to help.