Many homeowners took advantage of the decreased competition and historically low mortgage rates in 2020 and 2021, prompted by Covid-19 lockdowns.
Remote work also sparked a mass exodus from cities, as workers had the freedom to explore new parts of the country.
While some housing markets flourished, others declined, creating an imbalanced housing supply and competition.
However, now that return-to-work mandates have become more common and life has seemingly reverted back to pre-COVID norms, recent buyers may be reconsidering their move.
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Housing demand has remained high across most of the country, but the hotspots have shifted over the past several years. Areas with a relaxed way of life gained popularity during 2020 and 2021, causing housing booms and unprecedented demand in new markets.
However, attention has recently turned back to major cities that serve as job hubs as employers push increasingly strict in-office mandates.
Some real estate veterans anticipate a housing market resurgence in major cities over the next few years.
Ryan Serhant, founder and CEO of real estate brokerage firm SERHANT, sat down with TheStreet and explained how buyers can expect housing trends to shift going forward.
A family is shown looking at their new home. Lower mortgage rates and increased housing supply will help first-time buyers enter the housing market.
Shutterstock.
Major cities will see a resurgence, but supply will still be an issue
Major U.S. cities have always had heightened demand, particularly from working young professionals. Though city housing demand flattened during COVID-19 lockdowns, it has been renewed recently due to a few compounding factors.
Housing in major cities, such as New York, Los Angeles, Boston, and Miami, has always been scarce; the supply can’t keep pace with the demand. The National Association of Realtors found this trend was particularly pronounced in New York City, where only one housing permit is issued for every 23 jobs created.
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Serhant explains why cities will rebound over the next year.
“We’re going to experience COVID sellers who, years later, rethink that impulse purchase they made in 2021 or 2020 — which is already happening now,” he said. “Maybe they miss their friends, or the school their kids went to, or their parents are still there in that area. Some are getting called back to the office. So I think you’re going to see a resurgence.”
Increased pricing from demand and home insurance policies have driven up living costs in many previously untapped markets. Metro areas in Louisiana, Wisconsin, Michigan, and Florida saw the most significant increases in housing costs in November last year.
“I think that will probably be the biggest thing we discuss at the end of next year. Cities like New York and Miami are going to be stronger than they’ve ever been before,” he continued. “Buyers from recent booming markets are going to flock back to major cities, driven by the rising cost of living.”
“I think you’re going to see a lot of unique trends come to light by this time next year.”
Federal intervention may be needed to boost housing supply
The lack of housing inventory — fueled by sluggish new home construction, rising home-building costs, a construction worker shortage, and high mortgage rates deterring sellers from listing their homes — has become an issue across most markets.
While competition is helping drive market activity, many economists argue that a long-term solution proposed by the federal government is necessary to reign in compounding housing market hindrances.
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“Many markets are still staying strong because there’s just a significant lack of supply,” Serhant explained. “We need millions of homes created, which I think will be a focus for the incoming administration. Who is the biggest land owner in the United States? It’s the federal government.”
While the incoming Trump administration has suggested repurposing federal lands, there will likely be a lag between when new land-use policies are enacted and their impact on the housing market.
While this may not alleviate concentrated housing demand in major cities, it could redistribute buyers willing to move in search of more affordable options.
“If you want to solve the housing crisis, you can’t give people housing stipends and then increase prices all day,” he elaborated. “Taking some of this federally and state-owned land and using it to build more houses will provide more supply.”
“That will then bring down pricing, which, if you combine that with lowered interest rates, we start having a very different conversation about housing affordability.”
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