Investors snapping up US homes at record levels: What it says about the housing market

The U.S. real estate markets that are poised for a post-pandemic boom in 2021

Investors snapping up US homes at record levels: What it says about the housing market

New York, N.Y., is a hell of a town — and in a post-COVID world, home buyers may also see it as a hell of a bargain.

Since COVID-19 emerged as a major concern in the first few months of 2020, the pandemic has upended the country’s housing market in many ways. At first, health concerns fueled the digitization of the home-buying process, with some people opting to purchase homes sight unseen apart from virtual tours.

The shift to remote working arrangements for people in white-collar jobs meant that households all across the country could rethink where they lived. This caused a surge in interest in vacation towns, as wealthier Americans opted to purchase second homes to wait out the pandemic.

Meanwhile, the prospect of living in close quarters for months on end while waiting out the pandemic, coupled with record-low mortgage rates, drove millennial households to leave their abodes in major cities for suburbs across the country.

Now, though, as Americans begin to receive the first doses of COVID-19 vaccines, there’s seemingly an end to the pandemic in sight. But just as the pandemic helped to fuel soaring demand among home-buyers, the return to normalcy could fuel property sales in certain parts of the country — but not all local housing markets will benefit equally from the end of the COVID era.

“The strong demographics that were fueling the housingmarket pre-pandemic will remain in place post-pandemic, which should continueto drive healthy home sales across the country,” said Ali Wolf, chief economistat housing market research firm Zonda. “The markets I’m watching in thevaccine-economy are those that were turbocharged solely due to COVID-19.”

Here are the parts of the country whose housing markets economists say could benefit from the end of the pandemic:

Expensive coastal markets San Francisco and New York will become popular again

Some of the country’s most-expensive housing markets were already faltering before the pandemic began. In New York “prices have been falling now for the third year in a row,” Nancy Wu, an economist at Zillow ZG, +0.56% subsidiary StreetEasy, told MarketWatch in August.

Even before COVID-19 prompted home buyers and renters toreconsider their living arrangements in the name of comfort and affordability,these markets were stagnating because they had simply become too expensive formost people. On top of that, the pandemic took away much of the appeal oig-city living.

“The pandemic shut down all the reasons people live in cities, whether that was the nightlife, cafés, live music, or information sharing at the office,” Wolf said.

But these markets could see a snap-back. Falling prices — especially when combined with low mortgage rates — make owning in the Big Apple or somewhere San Jose, Calif., a more feasible proposition.

“Don’t write off the cities,” Wolf warned. “Places NewYork City, Los Angeles, and Miami are not dead.”

Newer tech hubs will be attractive to buyers

In its round-up of the top markets for 2021, identified a number of places across the country with burgeoning tech scenes (or markets that were close by). Sacramento, Calif.

, for instance, claimed the No. 1 spot because homes in the California capital are cheaper than San Francisco or San Jose.

By being within a two-hour drive though, tech industry employees could feasibly commute to and from those locales.’s ranking represents a fusion of markets that are popular now amid the pandemic and those that will be popular in the post-COVID world. Other growing tech hubs on’s list include places Boise, Idaho, and Denver, which are more affordable than Silicon Valley.

“Affordability is attractive at all points in time,” saidDanielle Hale, chief economist at

“The tech industry will continue to thrive, because even though we probably won’t be 100% remote, the way that many people are right now, remote work has been tested in this pandemic time period and is going to continue to be a feature of white-collar working life for the foreseeable future,” she added. “That’s going to position tech cities to do well.”

Smaller cities in the South and Sun Belt could thrive in a remote-working world

Many markets’ future will depend on whether remote-workingbecomes the norm or simply a fluke of the pandemic.

Some employers, such as TWTR, +0.10%, have suggested that they will let their staff work from home indefinitely. Should more companies follow their lead, that’s good news for less-populated cities with warmer climates, Wolf said, noting Tampa, Fla., Phoenix, Raleigh and Jacksonville, Fla., as examples.

“Pre-pandemic, house hunters had to juggle their affordablehousing needs with employment opportunities,” she said. “The shift to a moreflexible working environment enables markets with housing affordability, goodlifestyle, and a favorable climate to be even bigger magnets for newcomers,even after the pandemic ends.”

These regions have also attracted attention from real-estateinvestors — particularly those who are buying properties in states where theydon’t live.

“Out-of-state investors are gravitating toward a daisy chainof often overlooked and out-of-the way markets stringing mostly across thelower Midwest and Southeast,” said Daren Blomquist, vice president of marketeconomics at real-estate website

These investors have dominated in places Memphis, Tenn.,and Augusta, Ga. “Real estate investors on the frontlines of the housing marketare rushing to rural markets in anticipation of a population shift toward thosemarkets,” Blomquist added.

Where the jury is out: The Upper Midwest and Rust Belt

The National Association of Realtors put together its own list of the Top 10 markets it expects to thrive during and after COVID-19. The list included some of the usual suspects Boise and Spokane, for instance.

But some of the other markets are located in parts of thecountry that don’t frequently get tossed around as hot real-estate locales: DesMoines, Iowa, Indianapolis and Madison, Wis.

“We anticipate you will see migration away from Westerncities or coastal cities,” the National Association of Realtors’ chiefeconomist Lawrence Yun said during a forecasting summit earlier this month. “Peoplehave divergent opinions about which markets would do well.”

Which cities will see a housing boom will also depend on the diversity of their workforces. The economies in Midwestern and Rust Belt locales are still heavily dependent on sectors manufacturing.

These industries haven’t necessarily seen the same upheaval that sectors in cities New York have thanks to the rise of remote working, but that doesn’t mean those places will grow in popularity following COVID.

“It’s the markets that lack job diversity and lifestyle that are the ones that are more ly to suffer in the coming years,” Wolf argued. A good example of this is Orlando: While the pandemic forced the city’s tourism sector to all but shut down for much of 2020, Central Florida’s housing market has remained strong.

That’s because under the surface, there’s more diversity inemployment in that part of the Sunshine State than many assume. “Peopleemployed along the Space Coast, for example, are still working and are fuelingsolid home sales in Orlando, especially among the higher price points,” Wolfsaid.

That’s the same reason Houston has managed to weather the peaks and valleys of the oil market — while the petroleum industry is a major employer there, the city’s workforce is diverse enough to withstand those pressures.

But Midwestern and Rust Belt cities do have one big thinggoing for them: They’re cheap.

“In this current environment, low mortgage rates are creatingopportunities, almost regardless of what’s going on with local economies,” Halesaid.

“But if mortgage rates begin to rise, as we expect they will as theeconomy bounces back, you might see that hurt higher-price markets more.

Andsince a lot of manufacturing is concentrated in areas where real-estate isrelatively affordable you might see those markets outperform.”


Orange County housing indicators

Investors snapping up US homes at record levels: What it says about the housing market

As we make our way through the ongoing 2020 recession, it’s important to note that Orange County’s housing market never fully recovered from the 2008 recession. Home sales volume remained low throughout the elongated recovery of the 2010’s, as did job creation. Residential construction of all types continues to struggle in this region, leaving would-be homebuyers wanting for more.

As the 2020 recession maintains its grip on the economy, proactive agents will prepare for the slowdown in sales to linger here in Orange County and across the state. Job losses stemming from the coronavirus (COVID-19) pandemic, along with reduced MLS inventory, have held down sales volume.

Prices have continued to rise due to the current supply-and-demand imbalance, propped up by record-low interest rates. But this brief boost will not last as the impacts from the recession linger in the months ahead and the end of the foreclosure moratorium injects distressed sales into the MLS inventory.

Expect prices to decline later in 2021, bottoming in 2022 before the next recovery will begin in 2023-2024.

View the Orange County regional charts below for details on current activity and forecasts for its local housing market.

Updated March 3, 2021. Original copy posted March 2013.

Home sales volume dips

Chart update 03/03/21

2020201920182003: Peak Year
Orange County home sales volume35,00034,00035,10053,900

Home sales volume in Orange County remains weak and somewhat stuck at just over half the heights seen during the Millennium Boom.

Echoing state trends, Orange County saw a decrease in total home sales volume in 2018, ending the year 9% lower than in 2017. In 2019, home sales volume was a further 3% below 2018.

In 2020, home sales volume reversed course, rising a slight 3% above the prior year.

A sharp bounce in home pricing following the speculator interference of 2012-2014 has held sales volume back from any significant increases. Buyers’ incomes, already insufficient to keep up with quickly rising home prices, were further decimated in 2018 as mortgage interest rates increased.

In review, 2009-2010 Orange County sales volume rose slightly with the introduction of the housing tax credit, falling back in 2011 for lack of end user demand.

From the latter half of 2012 through most of 2013, speculator hyper-activity bumped sales volume artificially yet again, as it did in all of California.

The speculator buying wave receded and sales volume slumped in 2016-2019.

Looking forward, expect a similar dynamic in response to the ongoing 2020 recession. Today, federal stimulus and the eviction and foreclosure moratorium are providing a temporary boost to the housing market.

Along with low interest rates, which have caused home prices to increase, the housing market has thus far inched forward despite the economic recession.

A complete recovery with annual sales volume of around 46,000 in Orange County will be reached only after end user demand is buttressed by labor force participation and normalized job levels, expected in the 2023-2024 recovery period from the present recession.

Low turnover rate to continue

Chart update 09/07/20

Orange County homeowner turnover rate7.3%6.8%6.7%

Orange County renter turnover rate



Without turnover, homes do not sell. The homeowner turnover rate in Orange County has remained mostly level since the end of the recession in 2009, at 7.3% as of 2018. The renter turnover rate has declined since 2010 and was at 19.5% in 2018, the most recently reported Census year.

Expect homeowner turnover reports to slip dramatically in 2020. With 2020 recession job losses alongside COVID-19 eviction moratoriums, significantly fewer renters and homeowners are currently changing residences.

The homeowner turnover rate will rise once home prices and interest rates align to produce desirable homebuying conditions.

This is not expected before 2022-2023, when the additional and necessary factor of greatly increased residential construction will be experienced and a recovery from the 2020 recession will begin.

Then, members of Generation Y (Gen Y) will collectively rush to buy and Baby Boomers (Boomers) will retire en masse, selling and mostly buying replacement homes. International and domestic emigration into California will also play a significant role in suburban housing demand.

Homeownership remains low

Chart update 05/26/20

Orange County homeownership57.4%57.4%56.6%

Orange County’s homeownership rate has fallen since its 2007 peak of 62.7%. The most recent homeownership data shows a 57.4% homeownership rate in Orange County. Statewide homeownership has historically been about two percentage points below Orange County’s. The state average is currently 55%, thus homeownership reports in Orange County in 2020 ly remain around 57%.

Expect Orange County’s homeownership rate to remain near its present low level until 2022-2023, when the housing market will bounce back from the 2020 recession. Only with the return of jobs, higher wages and increased confidence will the first-time homebuyer population gain traction.

However, don’t expect the rate of homeownership to fully return to the inflated heights seen in 2007 anytime soon.

This rate was elevated by unfettered access to easy money, which mortgage regulators tamped down in 2014 with enforcement of ability-to-pay (ATR) rules to protect society from certain destabilizing types of mortgage lending.

These rules limit mortgage funding to those homebuyers with the financial ability to actually repay their debts.

Thus, the housing market won’t see a repeat of those Millennium Boom homebuyers who lacked the proper finances.

Though this translates to a slightly lower homeownership rate in the near term, it fosters a more stable future housing market in Orange County and the state.

The shift of Gen Y to rentals for a longer period before buying a home than in past generations also puts a cap on home sales volume.

Construction starts on the rebound

Chart update 03/03/21

Orange County single family residential (SFR) starts4,0003,2004,500

Orange County multi-family starts



The recovery picture is mixed for Orange County residential construction. After years of increased single family residential (SFR) construction starts, 2018 and 2019 both saw a decrease in the number of new SFRs started. In 2020, the trend reversed, with SFR construction rising and multi-family declining.

Multi-family starts in Orange County totaled 3,600 in 2020, down 31% from the previous year. This decline resumes a long downward trend that was briefly broken in 2019. However, statewide legislative moves focused on adding more housing for the ever-growing resident population will see multi-family gradually climb in the coming years.

2020’s slowing construction starts were partly the result of shelter-in-place orders in response to the COVID-19 pandemic and decreased confidence in the economy from lenders and builders.

The next peak in multi-family construction starts will ly occur in 2023-2024 period due to a boost from state legislation. However, don’t expect SFR construction to recover fully anytime soon.

The next peak in SFR construction starts will ly occur in the post-2024 era as renters shift to becoming homeowners following a statewide-push for more construction.

Even then, SFR starts are unly to return to the mortgage-driven numbers seen during the hyperactive Millennium Boom.

Jobs are recovering, too slowly

Chart update 03/03/21

Dec 2020Dec 2019annual change
Orange County jobs1,553,0001,695,700-8.4%

California regained all jobs lost at the end of 2014, but Orange County didn’t catch up until the last quarter of 2015. Since 2018, jobs have struggled to gain in Orange County. The number of employed individuals in Orange County is 8.4% below a year earlier as of December 2020, amounting to a loss of 142,700 jobs compared to before the 2020 recession.

As seen in Figure 9, job additions were one-third slower to come about during the past recovery compared to the 2000s recovery, and at half the pace of the 1990s recovery, echoing the secular stagnation of the 1930s. When will all of these jobs catch up with Orange County’s continuously growing population?

Orange County was on course to return to pre-recession levels in 2020, but not before the 2020 recession arrived, causing significant job losses in the region.

The share of jobs lost here in Orange County is worse than the job loss experienced statewide, which is 8.0% below a year earlier as of December 2020.

Expect a W-shaped recession in the coming months, with jobs rising and falling, not to enter a true recovery until 2022-2023.

Jobs in the real estate industry

Chart update 03/03/21

Dec 2020Dec 2019annual change




The number of individuals employed in the real estate and construction industries fell during the recession, beginning to show mixed improvement in 2012.

While the number of real estate professionals is now level with pre-recession levels, construction workers are still well below their Millennium Boom peak, and declining going into 2021.

Jobs numbers have already begun to recover in the construction industry, but the number of real estate professionals continue to decline as sales volume slows.

Construction jobs will ly continue to rise in the coming years, as state legislation focusing on adding more housing inventory is not impacted by the recession. The real estate industry will see jobs increase beginning in 2023-2024 with the recovery from today’s recession.

Per capita income plays catch up

Chart update 03/06/19

20172016Annual change
Orange County per capita income$69,300$65,700+5.4%
California per capita income$67,000$63,900+4.9%

The average income earner in Orange County made $69,300 in 2018 (the most recently reported data from the Bureau of Economic Analysis).

Sustainable home price increases (not driven by cash-heavy investors or market momentum) are limited to a ceiling set by personal income, the annual rate of increase from 2018 to 2019 in this region being 5.4%.

These annual income and price increases will remain low until an optimal employment level is attained with a full jobs recovery for the 10%+ population growth since 2007. Orange County will ly achieve these job numbers in 2020.

Meanwhile, price increases will remain low since homebuyer occupants ultimately determine selling prices — they can only pay as much for a home (or rent) as their savings and income qualify them to pay — nothing more for a sustained period of time.

However, per capita income increases will ly slow somewhat in 2020-2021 following the 2020 recession. This, along with higher interest rates, will hold back home sales in the next few years.

Look to 2021-2023 for the next significant increase in home sales volume and prices.

This period will be driven by the shifting demographic trends of retiring Baby Boomers and their Gen Y children who will become homebuyers en masse following the next recession.


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