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How did the US Residential Market go in 2020? Here is a brief summary of the past year and some forecasts for 2021.

22. December, 2020

 

Spoiler alert: the US Residential Market in 2020 exceeded expectations!

 

This 2020 has done anything but follow the forecasts, and the US Residential Market, despite the covid19 health emergency and the consequent lockdown restrictions, has reacted with results beyond all expectations and very interesting in terms of sales and solidity of rental yields.

First, let's do a little rewind. What was the US Residential Market like at the beginning of the year?

It seems centuries ago, however, just at the beginning of the year, the US Residential Market was growing strongly and gave hope to professionals in the sector who were unbalanced with forecasts for an unprecedented 2020 and, in a sense, it did.

 

To fully understand the performance of the US Residential Market, it is essential to know its unique characteristics.

 

After the subprime crisis of 2008, the amount of real estate placed on the US Residential Market was stuck for years, leaving an extremely small amount of new properties available to Americans. This, together with a reborn difficulty in accessing credit, has made the rental market a very interesting terrain in which to invest. Without considering the nomadic DNA of the average American, who sees US citizens traveling several times in their lifetime due to study and work.

Many investors, including the newly created OPISAS, seized the opportunity with foresight and invested in the purchase of existing properties, completely renovating them to make them accessible to the average American. An undoubtedly alternative form of real estate investment in the United States, which over the years has become very interesting for diversifying one's portfolio.

 

What does all this have to do with the performance of the Residential Market in 2020?

 

The starting situation that saw in the US Residential Market a limited amount of properties compared to the demand, with the covid emergency was further accentuated. On the one hand, work on the construction of new homes has been significantly slowed down. On the other hand, thanks also to mortgage interest rates at historic lows, the new generations of buyers have entered the US Residential Market, further increasing demand compared to the availability of supply.

 

This has led to a significant reduction in the average time required to sell a property.

 

In September, in the US, 71% of homes were sold on average in 21 days, a pace unmatched compared to other markets in the world where it takes months and months to conclude a property sale. Suffice it to say that in the United States, it is estimated that if there were no new properties listed for sale, the entire national inventory would be sold in just 2.7 months.

 

 

 

 

Speaking of sales, as we can see in the Federal Reserve Economic Data (FRED) chart, the sales of existing properties in the US Residential Market, reached a minimum level in May with a figure of 3.9 million, when in full lockdown due to covid19, the US Residential Market was blocked, leaving many of the negotiations on standby. Since June, however, the recovery has put the turbo, even returning above the pre-Covid data of February (the month in which, sales were 5.7 million), with 5.8 million units sold already in the month of July and exceeding all expectations in September with 6.5 million units sold and 6.8 million in October, marking a further jump of + 9.4% compared to August and even +20.9% compared to a year ago.

In short, strong signs in this 2020 that is about to end with a situation that has gone beyond all expectations.

As mentioned above, the covid19 emergency also had effects on the US Residential Market, but not all of them were negative.

 

In what form and how much has the covid emergency influenced real estate investments in the United States?

 

During the first wave of the coronavirus, the real estate supply chain was blocked like all other sectors but unlike other markets, it recovered very quickly, surprising the same professionals of the US Residential Market.

In recent months, the digitization of the real estate sector has increased exponentially but Proptech has been a well-established reality for many years in the United States and during 2020, it has overcome the objective difficulty of organizing in-person visits to the properties, digitizing the customer journey and leading consumers to discover the advantages and safety of digital procedures, trusting more in online purchases and investments.

But even more significant was the sea change in living at home by the average American. 

As an indirect cause of the lockdown measures, all of a sudden, millions of Americans found themselves having to live with their families under the same roof 24 hours a day, realizing, for example, that it is not big enough to maintain the privacy and comfort of each member. Or, suddenly, smart working has become a widespread reality, making many want to move to less chaotic neighborhoods and with better services for children and families. Or preferring the suburbs, or smaller and cheaper cities. And again, many people who have moved to the big cities for work are realizing that they could now return to their home areas.

In short, once again the social, working and, consequently housing dynamism of the Americans proves to be one of the main drivers of this market.

 

But what were the consequences on the rental market?

 

The rental market has remained essentially stable as can be seen from the graph below which shows the average trend in rental prices for first homes in US urban centers.

 

 

 

Moreover, thanks to the powerful and immediate federal support for American families, punctuality in the payment of these rents has also remained at very high levels. The stimuli promptly deployed by the federal government, such as the CARES Act and other programs, have, in fact, provided unprecedented financial support to the average American. In April, the average personal income in the United States even increased by + 10.5% on a monthly basis, more than double the previous record. Government welfare benefits jumped 90% to an all-time high of $ 6.300 billion.

These stimuli were primarily used to pay rent. After all, securing a roof over their heads is the primary need par excellence of Americans and this roof is definitely for rent. In fact, in the US Residential Market, the percentage of rented residents corresponds to as much as 80% of property owners in most of the real estate categories.

 

But how did rent payments go during this 2020?

 

In the graph below of the National Multifamily Housing Council, which is responsible for tracking monthly and weekly rental payments for American homes, there is substantial stability compared to 2019.

 

 

What can we expect from 2021?

 

The news of the vaccine and the choice of the new American president are influencing the American economy, but, above all, they are further stabilizing the US residential market.

The election of the new president of the United States should, in fact, have a positive effect on the data we will see in 2021, thanks to the announced "Biden Economy". The nascent new administration has repeatedly declared its intention to put the American Middle Class at the center, favoring it with economic maneuvers focused on work and welfare funds. First of all, the year-end maneuver called “Stimulus Deal”, which will be approved in these days and which provides for a total of 900 billion in aid.

Of these, $ 600 will be paid to each American (under $ 75,000 per year for singles and under $ 150,000 for couples), which will rise to $ 2,400 in the case of a family with two dependent children. In addition, an additional $ 300 will be paid to the weekly unemployment benefit.

In summary, all of these announced policies should result in greater liquidity in the pockets of the average American tenant and helping to open 2021 positively.

Among the evident changes in 2020, indirectly determined by the lockdown measures in the US Residential Market, which marked a transformation in the purchasing behavior of Americans, the choice to buy properties in more peripheral areas stands out. A migration determined by the conspicuous increase in smart working workers who gradually, taking the opportunity of mortgage interest rates at historic lows, have chosen to migrate from first-tier metropolises to smaller but no less important centers, where, perhaps , real estate costs are lower, space is greater and services are better.

A constantly growing trend that can only continue to grow even with the new year.

It is interesting to note which are some of the most attractive cities from this point of view and the characteristics they have in common. Among these, there are several cities in which OPISAS has been investing for years now, a noteworthy example is undoubtedly Baltimore, in the state of Maryland or Jacksonville in Florida, two growing cities which, for this reason, represent solid and profitable real estate investments in the United States.

Carefully evaluating the area in which to make the investment and analyzing all the specificities of an area and property is essential, but it also requires a lot of time that sometimes most people do not have available. How then? A good starting point is to rely on a company like OPISAS, a partner that selects for you only the best investment properties, evaluating the development prospects of the area and the immediate profitability of the property without having to worry about how to do it. every little thing.

OPISAS has been selecting the areas in which the value of the properties compared to the rental market generates the best investment opportunities since 2008. In this way, the investor will have an immediate return and an annual yield from 6% to 11%, also being the sole owner of the property.

 

Contact us now and find out more about investment opportunities in the United States!

 

 

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