While shelter-in-place is common among most markets, they each have very different housing market fundamentals. The key questions to ask for each market are:
- Demand: What will demand look like once shelter-in-place is removed? By price point and rent range? By submarket? Two decades of forecasting home prices and sales volumes by metro area have taught us that job growth and losses in the industry sectors most important to the local economies will play a key role in this answer. Mortgage financing will also be critical in determining whether the demand shifts to rentals or for-sale housing.
- Supply: What will supply look like? Supply was balanced heading into this recession. We calculated that the country needed 1.4 million housing units/year, and that is exactly what the industry supplied. But construction was overweighted to multifamily units. Over the next 18 months, we expect multifamily construction will add new supply, while single-family construction will certainly slow down, limiting that inventory and helping the market recover more quickly.
We highlight The Light, or potential opportunities in some major markets below.
- Boom markets. The Austin, Phoenix, Salt Lake City, and Tampa metro areas have less exposure to the industries most impacted by COVID-19 and are also affordable markets with pro-growth governments. We also rated all four for-sale housing markets as Strong or Very Strong in our February research reports, and we expect them to be among the first to earn their ranking back. Each of these markets also had high apartment construction, but vacancy rates below 6.0% should help them weather the storm of move-outs and completions.
- New boomtowns. Charlotte, Denver, Dallas, Nashville, Portland, and Seattle are six of our favorite boomtowns, attracting far more than their share of smart young workers. These markets also attracted a lot of development, which will delay their recovery a bit. Patient investors will reap great rewards.
- Less competition. Las Vegas, Miami, and Orlando are on our list of markets to recover last due to their reliance on tourism. Our clients with patient capital and who prefer to avoid bidding wars should consider these three markets as great long-term opportunities. It is going to be very interesting to see what happens to the hotels in these towns.
For more on geographic opportunities, join our research subscriber membership or let our consultants help you devise a strategy that fits your risk-reward criteria and background. Rick Palacios is our Director of Research, and Lesley Deutch and Ken Perlman are two of our consulting principals.
We are continuing our weekly webinars for our research subscribers, who are going to help our firm through to the proverbial light at the end of the tunnel. Their willingness to share insights with us during these times is making us all smarter. We are so fortunate to have them, and we are certainly willing to let you join the club by contacting Sara Newton-Mahony.
We’ve also added a new page on our website with our latest releases and resources related to COVID-19, including our weekly surveys, newsletters, and podcast episodes. We will continue to use real-time data, ongoing research, and our in-house consulting expertise and network of clients and experts to do our best to provide a forward-looking summary of the changing housing market.