The housing market is a seasonal industry, and experienced real estate investors understand the importance of timing when buying rental properties. Certain times of the year are usually busier than others. The spring real estate market is typically the most active season, and there are some noteworthy developments for 2021.
While the spring real estate market last year suffered a hit due to the emergence of COVID-19, this season is shaping up to be one of the most competitive real estate market periods ever. This is despite the fears in certain quarters of 2020 about a housing market crash. Of course, housing market predictions can be a little hard to make. But we’ve got a list of spring real estate market trends, including data from Mashvisor, to back up our claim.
So, if you’re thinking of purchasing an investment property during the 2021 spring real estate market, this article will give you all the insight you need to make that decision.
1. Fewer homes are getting listed on the spring real estate market in 2021
The spring real estate market 2021 is seeing fewer properties being listed for sale.
A lot of factors are contributing to the lower number of homes we’re seeing on the spring housing market this year. These include severe weather conditions and a record-low supply of housing properties, according to CNBC. And when you compare the numbers for February 2021 with the same period in the last four years, home listings have dropped by 207,000 properties. Nevertheless, there are some peculiar cases in certain cities like San Francisco, San Jose, and Denver, where the listings are higher.
For sellers, the light is brighter at the end of the tunnel, who now stand a good chance of making more returns on sales. According to Redfin, the asking prices of freshly listed properties are at a record high of $347,475. There is even more reason to feel optimistic.
More than half of the homes that real estate agents sold in February were gone within two weeks of being listed on the market, at 55%. Just a year ago, this percentage was 44%.
One of the vital questions investors often ask concerning the spring season is whether it’s a buyer’s market or seller’s market? All the developments mentioned above point to the spring real estate market 2021 predominantly being a seller’s market, with some minor exceptions across locations. This means that real estate investors will need to put some extra effort in order to land lucrative deals. Using the best real estate investment tools will help in this regard.
Related: How to Buy a Profitable Investment Property in a Seller’s Market in 2021: 5 Steps
2. More Millennials will be getting homes for the first time
According to a survey by the National Association of Home Builders (NAHB), more Millennials are approaching their peak age as first-time property investors or homebuyers. For perspective, a bulk of Millennials are now 29 years old, and usually, the average age for peak first-time homebuyers is 32 years. 27% of this population are also planning to buy a home in the next 12 months. That is an 8% increase from the previous year, which is interesting because we’re just recovering from a major pandemic.
Freddie Mac, a federal home loan mortgage establishment, also speculates that Millennials in the US, together with the country’s growing immigrant population, will contribute 1.2 million new households every year for the next ten years.
So, it makes sense that this population of the economy will be renting and buying homes and more so during the spring real estate market which is generally the busiest time for housing in the US. As a real estate investor, you may then want to consider investing in properties best fit for Millennials or people just starting new families in general.
Related: 8 Things Millennials Look for When Renting
3. Single-family home starts are rising
As mentioned earlier, there’s an obvious reduction in the number of home listings at the moment and to reach a balance, this would have to increase by an unlikely 25%, according to CNBC. But single-family homes are slowly picking up pace in inventory, which will go a long way to meet the high demands for housing properties.
In March 2021, single-family housing starts rose by 15.3% to annualized units of 1.24 million. This represents an increase of 34.7% from one year ago and the second strongest it’s been since 2006. Further proof of the positive outlook on single-family homes is the rising number of permits issued, which increased by 4.6% from what it was in February.
On the other hand, single-family housing completions in March reached 1.09 million, a growth of 5.3% from February.
All of these activities are gearing towards meeting the huge demand from the renting population. This is also good news for landlords as this property type makes for perfect rental properties as they tend to attract good tenants and generate a high return. Investors thinking of buying an income property now will have many property options to choose from on the spring real estate market.
Related: What to Look for When Investing in Single-Family Homes
4. Fear of higher interest rates may increase rental market activity
Fewer people may eventually own homes this spring due to a possible increase in interest rates. According to Freddie Mac, the 30-year fixed-rate mortgage passed the 3% threshold for the first time in almost a year in March.
So, most people will be asking the all-important question, “Is spring a good time to buy a house?”
For most, the answer is NO. A lot of households will likely turn to the rental market for options in the short term. As an investor, this can be a motivation to invest in a rental property this 2021 spring.
5. COVID-19 vaccine rollout will boost housing inventory
The distribution of the COVID-19 vaccine in the United States is going a long way to ease concerns. And this could have a direct impact on the number of listings available on the real estate market this spring. We could see a spike in the number of rental properties for sale. In specific, homeowners will be more likely to put homes for sale, giving buyers more options in an already crowded market.
Buyers will also be more proactive in purchases as they try to stay ahead of a potential increase in mortgage rates towards the end of the year. When this happens, houses will generally become more expensive, while the market will still be relatively competitive, regardless.
On the other hand, if you’re considering selling your investment property, this can be an avenue for you to find properties that better match your needs and that of your prospective buyers. Most times, this happens in the form of property trade-ins between two parties.
Related: How a COVID-19 Vaccine Could Impact the Housing Market 2021
Best places to invest in real estate this spring
North Carolina is one of the best places to invest in the spring real estate market 2021.
Based on our real estate market forecast, the US housing market will be hot this spring for sellers, with lots of potential for massive gains. As a real estate investor, you’re probably thinking, “So, where should I put my money?”
Not to worry. We’ve harnessed Mashvisor’s recent data to bring you the best places to invest in real estate this spring for both traditional and Airbnb properties. For high return, you should consider investing in these locations across the spring real estate market 2021. These cities offer the best in cash on cash returns, rental incomes, occupancy rates, and so on.
Best places to invest in a traditional rental property
#1. Bishop, California
- Median Property Price: $477,450
- Price per Square Foot: $263
- Price to Rent Ratio: 17
- Monthly Traditional Rental Income: $2,350
- Traditional Cash on Cash Return: 4.92%
#2. Inverness, Florida
- Median Property Price: $224,876
- Price per Square Foot: $135
- Price to Rent Ratio: 15
- Monthly Traditional Rental Income: $1,275
- Traditional Cash on Cash Return: 4.59%
#3. Greenville, North Carolina
- Median Property Price: $282,604
- Price per Square Foot: $118
- Price to Rent Ratio: 15
- Monthly Traditional Rental Income: $1,563
- Traditional Cash on Cash Return: 4.38%
#4. Lakeworth, Florida
- Median Property Price: $274,990
- Price per Square Foot: $1107
- Price to Rent Ratio: 13
- Monthly Traditional Rental Income: $1728.97
- Traditional Cash on Cash Return: 4.36%
#5. Mesquite, Texas
- Median Property Price: $239,044
- Price per Square Foot: $138
- Price to Rent Ratio: 13
- Monthly Traditional Rental Income: $1516
- Traditional Cash on Cash Return: 4.08%
Best places to invest in an Airbnb rental property
#1. Covington, Georgia
- Median Property Price: $266,352
- Price per Square Foot: NA
- Monthly Airbnb Rental Income: $2,619
- Airbnb Cash on Cash Return: 7.3%
- Average Airbnb Daily Rate: $164
- Average Occupancy Rate: 60.52%
#2. Abilene, Texas
- Median Property Price: $275,725
- Price per Square Foot: $130
- Monthly Airbnb Rental Income: $2824
- Airbnb Cash on Cash Return: 7.06%
- Average Airbnb Daily Rate: $172
- Average Occupancy Rate: 66.54%
#3. Greenville, North Carolina
- Median Property Price: $282,604
- Price per Square Foot: $118
- Monthly Airbnb Rental Income: $2512
- Airbnb Cash on Cash Return: 6.64%
- Average Airbnb Daily Rate: $90
- Average Occupancy Rate: 67.13%
#4. Fayetteville, North Carolina
- Median Property Price: $234,815
- Price per Square Foot: $138
- Monthly Airbnb Rental Income: $2352
- Airbnb Cash on Cash Return: 6.24%
- Average Airbnb Daily Rate: $101
- Average Occupancy Rate: 73.2%
#5. Concord, North Carolina
- Median Property Price: $346,255
- Price per Square Foot: $170
- Monthly Airbnb Rental Income: $3025
- Airbnb Cash on Cash Return: 5.64%
- Average Airbnb Daily Rate: $137
- Average Occupancy Rate: 52.8%
Overall, the Airbnb rental market looks like a good proposition for investors right now, especially with properties on the North Carolina housing market. The ratio of home prices to returns also means that investors will be getting value for money. But the most interesting part of the data is the average Airbnb occupancy rate across most states, with an average of 60% for the locations listed above. This means that, as an investor, you don’t have to worry about people renting your home and, ultimately, cash inflow.
Related: What Airbnb Occupancy Rate Can You Expect in 2021?
How to prepare for the spring real estate market
Home sales during spring come with stiff competition. As a real estate investor, the best way to get ahead is to prepare. This includes knowing the expected income for both Airbnb and traditional rentals, the best locations you can find them, properties with the best cash on cash return, as well as the ones with the highest occupancy rates, and so on.
And you can only achieve this when you have the right tools to give you insights. Mashvisor’s real estate investment tools provides you with all the information and analysis that you need to make the right decision. The Mashvisor heatmap shows you the best neighborhoods to invest in, as well as the properties for sale available in that location. Meanwhile, the investment property calculator does all the hard work of running the expected projections on each property in real-time.
With all this information in hand, you will be well equipped to invest in rental properties this spring season.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.