By Reid Buckley
While it is clear that COVID has brought major short-term disruptions to the real estate market, many people are wondering if there will also be significant impacts to the real estate market over the next five years.
I believe that COVID has caused an irreversible paradigm shift in American living that is driven by at least three factors: work, recreation, and spending. These factors all impact the type, size, and location of homes people want and the amount of money they’re willing to pay for their home.
While some companies are requiring all employees to go back to work full-time, a certain percentage of people are going to embrace and retain hybrid work for the long term. While this may only be a fraction of the workforce, it represents millions of people who will be predominantly high-income earners with skilled jobs that are more mobile. These are people who have demonstrated to themselves and their employers that their job can be done just as, if not more, efficiently from a remote location.
This change to hybrid work will in turn change where people live. Hybrid workers are going to be moving into areas that are suburban, exurban, or even rural to pursue a better quality of life at a lower price and that offer different recreational opportunities for their families.
In addition to hybrid work, recreation styles are also changing. People in numerous cities that shut down streets for pedestrians and dining during the pandemic are now demanding to keep these areas car-free permanently. In one Brooklyn neighborhood, children now play in the street, there are free yoga classes, vendors sell homemade food, and neighbors are getting to know each other, according to a New York Times article. Downtown Annapolis has seen restaurants and diners lobbying for a permanent allocation of street space for outdoor dining. People want to enjoy this experience even after COVID passes.
Increased outdoor and at-home recreation also demonstrate lifestyle changes. The boating industry is one example. It is very difficult to buy a small boat now because so many people want to access the Chesapeake Bay. The kitchen equipment and furniture industries are having a boom; in some areas it’s hard to buy new dishwashers, refrigerators, or sofas. With people spending more time at home and not going to restaurants, they want to have a luxurious kitchen where they can be with their friends to prepare meals and entertain on a small scale, preferably outside.
Spending habits have changed with COVID. Less money is being spent on restaurants, travel, and sporting events. This leaves more funds available for moving up in housing or adding recreational amenities. This change in desired housing will affect every economic layer in the real estate industry: people who live in apartments will be anxious to move into townhouses so they can have space to host a barbecue with friends. People in starter homes are going to want to move to larger homes with space to work and study at home and even more recreational activities for their family. People with larger budgets will want waterfront homes and pools.
In summary, we have all seen the clear short-term impact of COVID on real estate; however, I believe that society has undergone a change that is going to affect the way Americans work, play, go to school, and commute and, consequently, where and how they live. Even in a future post-COVID world, I think we have passed a tipping point in which these changes and migrations will continue for at least the next several years. In some places, the trend to get more space and more recreational opportunities will continue to drive price increases, a shortage of homes, and a difficult time finding homes with certain amenities like swimming pools. Other areas may find that prices are softening or that they have to offer more amenities to attract new residents. Anne Arundel County is poised to benefit over the long term due to our small-town vibe and incredible natural resources.
I would love to hear your thoughts on this topic. Please feel free to email me if you have any questions about the current real estate market.
Reid Buckley, MBA, is a third-generation licensed real estate agent and waterfront specialist with The Mr. Waterfront Team of Long & Foster Real Estate. She can be reached at 410-266-6880 or via email at [email protected].
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