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Real Property Management’s 2020 Year in Review 

As the current year draws to a close, the time is right to look back at how well the housing market performed in 2020 – and how accurate our predictions were about it. Each year, the Real Property Management national headquarters offers an economic outlook for landlords and investment property owners. We gather data from key sources to help guide single-family rental home investors and landlords in successfully acquiring and managing investment properties. 2020 turning to 2021

Last year, we predicted a 2020 housing market that seemed poised for steady growth. At the end of 2019, it seemed like we had avoided any serious economic trouble, with low interest rates, record low unemployment rates, and steady economic growth painting an overall positive future for rental property owners. Little did we know that 2020 would bring unprecedented circumstances and a pandemic that, in just a few short months, has irrevocably changed many of the fundamental aspects of daily life. In past years, we’ve been highly accurate with our economic outlook predictions. But given the extraordinary challenges that 2020 has brought, how accurate were our predictions for the single-family rental home market this year? Find out below. 

Prediction #1Home prices will continue to grow, but at a much slower rate. 

Outcome: While there have been some unexpected shifts in home prices that favor suburban areas over urban markets, on a national level U.S. median homes values did continue to grow in 2020. While that growth rate was relatively slow, it was not as much of a slowdown as originally predicted. According to a recent CoreLogic report, home prices increased an average of 5.5% over last year, the highest year-over-year gain since 2018. While experts caution that the data, we have does not yet fully account for the economic effects of the pandemic, current trends show that in 2020 home prices were rising faster in smaller markets, reflecting a new demand for homes outside of crowded urban centers. 

Prediction #2Mortgage rates will remain relatively steady 

Outcome: The 2020 housing market benefitted from record low mortgage rates all year. Rates continued to drop throughout the year, with mortgage rates for a 30-year fixed-rate loan averaging 2.95% at the end of 2020. The low rates created a flurry of refinancing activity as property owners acted to take advantage of the savings. The low rates were good news for investors, as well, keeping the costs of financing new investment property well below expected levels. Man and woman in business meeting discussing past year's outcomes.

Prediction #3Inventory levels will continue to be tight 

Outcome: While housing inventory levels were low at the start of 2020, that inventory saw further declines throughout the summer. When combined with interrupted home construction and a stronger than normal buyer demand, inventory of homes for sale reached historic lows in 2020. Nationally, the inventory of homes for sale decreased 39.0% over the past year, and newly listed property decreased by 13.8% – both showing steep downward trends month over month. Under such conditions, single-family homes are sold unusually fast, creating intensely competitive market conditions.  

Prediction #4Rental rates will continue to steadily increase 

Outcome: At the beginning of the year, rental rates were on track to realize strong growth. But the pandemic-related economic downturn, widespread unemployment, rent freezes, and eviction moratoriums have skewed the data enough that it is still difficult to accurately compare rental rate growth for all of 2020. Nationally, rental rates increased 1.7% in July, a significant slowdown from the 2.9% recorded for July 2019. At the same time, certain markets saw strong rent increases, some over 6and even 7% year-over-year, while some large metro areas showed rental rate growth dropping to negative numbers. These shifts may create new opportunities for investment property owners looking to expand into new markets. 

Prediction #5Vacancy rates will hold steady in 2020 

Outcome: Despite challenging economic circumstances, national vacancy rates did hold steady in 2020. Vacancy rates for the third quarter of 2020 were 6.4%, down just slightly from a rate of 6.8% in the third quarter of 2019. While such steady numbers are encouraging, it is important to note that they may be based, in part, on the effects of rent freezes and eviction moratoriums. When these measures expire, as they must at some point, most industry experts anticipate some dramatic fluctuation in vacancy rates. However, these same experts predict that the single-family rental market will not be impacted as strongly as the multifamily rental market, once again demonstrating the stability and resilience of investments in single-family rental properties. 

Looking back, 2020 was a challenging year in many ways. But despite a few unanticipated surprises, many of our predictions were still remarkably accurate. With low interest rates and steady growth in home prices, there remain many opportunities to optimize profitability and hedge against the effects of the recession. At the same time, the market will likely remain unusually competitive, and rental and vacancy rates in many areas may fluctuate for some time to come.   

Check out our predictions for 2021 by visiting the following link: Real Property Management’s 2021 Economic Outlook. 

 

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