How COVID-19 Has Changed the Real Estate Market

In the past year, the real estate market experienced the same robust demand it has enjoyed for most of the 2010s. However, the COVID-19 pandemic has exposed many subtle shifts in that demand, underlining the new ways in which buyers and sellers are valuing their living spaces.

It continues to be a seller’s market, with sales increasing by 21 percentage points in 2020. Low interest rates are both enticing new buyers and helping to limit housing inventory, as current owners are being given an attractive opportunity to refinance.

But the owners who are choosing to sell are listing their homes with a new degree of intentionality.
 

As people are spending more time at home (and anticipate more of the same in 2021) they are demanding more flexibility from their spaces. A house that might have been listed as a 3BR before is now being listed as 2BR + Office. And the "open concept" layout is no longer as prized---buyers are now looking for intentional divisions to create and enforce a psychological divide between the spaces that function for work, school and down-time.

“We’ve been advising sellers to extend the functionality of their space,” says Amanda Buhman, real estate agent with Lakes | Sotheby’s International Realty in Minneapolis. “And if you don’t have it, can you carve it out? If you’re going to do a small project, can you create built-ins or something that makes the space feel more intentional?”

Buhman points to home office areas as the prime example on many buyers’ minds, but also storage spaces that make smart use of nooks and crannies. Outdoor space, as well, helps extend the functionality of a home. Intentional patio seating is especially attractive as most predict a continued need for more outdoor gatherings in 2021.

The pandemic has also changed the notion of what constitutes a desirable location. It may be that urban centers, once prized for their proximity to culture and restaurants, won’t be as attractive as many venues shutter and struggle to remain open. If the office remains virtual, that opens up more options for where people choose to live if they don’t feel tethered to convenient transportation to work.

Exurban and rural areas can be more affordable, and certainly less crowded. Though increased demand is already creating a serious uptick in prices in those markets.

In general, the pandemic has buyers looking to spread out, both geographically and within their chosen space. Those who might have been looking for a condo before might now be looking for a single-family home. Those who might have felt tied to a city center are now seeing the value in living at a distance. And as buyers continue to grapple with these changing realities in 2021, expect homes and locations that feel more suited to those realities to look more and more attractive.