We all know the story: In the year leading to the crash home prices where constantly growing. As a consequence, too many people took on loans they could not afford and banks did not do enough checks on Income. (If you did not watch the movie The Big Short you should) . Robert Shiller ( Yale, Nobel in finance) predicted the bubble but how? One of the signs to look out for is when there is a big buzz on the street about easy and high returns. That easily brings an overvaluation, not only in the real estate market but in the capital market as well. I took an online course with professor Shiller and that was quite helpful. When around 2015 many investors rushed to buy Cannabis stocks I was aware that since so much buzz was generate the stock could easily be overvalued so I stayed out of it. And while a few people made a lot of money in cannabis but many stock turned out to be just a bubble.
Recession Phase 2008-2011
Time on the market was slow and it was a buyer markets After the real Estate Crash of 2008 recovery did not start for 2 or 3 year and when it started the growth was slow in must US markets. The most effected areas were some of the suburbs, PG county, Baltimore had a real drop in values.
Recovery Phase 2012-2016
Around 2011-2012 recovery started. Rental Vacancies Start to Drop
Time on the market got shorter. Prices started slowing increasing.
Expansion Phase 2016-2020
New Constructions in housing and Commercial increase to keep up with demand. Renovation started in PG county and Baltimore City area.
During this period I always looked at the prices pre-2008 recession and I preferred areas where the prices remained below 2006-7 peak. I considered this properties to be often undervalued and therefore with a higher probability to show growth.
Time on the Market is short to average.
2020 and the Covid first impact on Real Estate
Right after the Covid lock down in March 2020 most of the people thought real estate would not sell so not many people placed their home on the market. What happen then is that some people still need to buy a house and move but there were so with few homes on the market and since Market prices are proportional to supply-demand cost of residential real estate temporary increased. Low interest rates helped the buying process as well. People did find, once again, value in a single family e home with a good living space.
Milan was particularly hit by Covid-19 and so was New York. Living in a tall apartment building it was not ideal to avoid the virus. I live in the suburbs on 2 acre land so it was never too terrible during the lock down. If you live at the 12th floor of an apartment in Milan it is very hard to leave the home without meeting anybody and of course meeting neighbors will facilitate the virus spread. If you lived in a single family home or a townhouse it was a lot safer getting in and out.
I am Italian and I also keep looking at the Italian real estate market. Most of the homes in Italy are apartment and there is no suburbia in the same sense as in the US. After the lock down Italians are still mainly looking for apartments but with a few extra things: a balcony or terrace or in any case some outdoor space is a big plus now. Buying a bright a sunny apartment is even more important now. I am not sure if smart working / telecommuting will allow Italians ( or American ) to simply move toward the suburbs and avoid the main city all together.
2021 after the growth of 2020
U.S. housing gained about $2.5 trillion in value in 2020 — the most in a single year since 2005, according to a new Zillow analysis. That made an increase of about 10% in value. What will happen next ?