Last year saw dramatic, rapid-fire changes that forced us to completely reevaluate the way we live our lives, do business, and think about our finances and investments. Over a trillion dollars were printed by the Federal Reserve to keep the U.S. economy afloat through the pandemic, and it's estimated that just over 23% of all of the USD in circulation was printed in 2020.
This means that inflation is coming, no matter how hard we try to fight it.
How does this affect property real estate values, though? Will the value of land increase, decrease, or stay the same? Should you sell your property or hold on to it in hopes of making more?
These questions are not only being asked by the everyday Joe, but also by industry professionals. While there's a lot of data that still needs to be extrapolated, and we don't have all of the facts, some of the top financial analysts have put together what they believe is a possible model of the future.
In today's post, we're going to discuss some of the economic theories about where property/real estate values are going this year and in the future. Before we get into that, though, let's take a quick look at some important details regarding the exact definitions and differences between different types of real estate, so you know what we're talking about.
What Is The Difference Between Real Estate And Property?
If you've ever read a will or read the fine print of a loan document, then you've probably come across the terms property and real estate. Although the two words are often used interchangeably, they have very different definitions.
Property can either be tangible or intangible. It's a far more broad term and encompasses everything that you own, whether it's a house, a car, your television, or even your ideas (intellectual property).
Real estate, on the other hand, is a type of physical, tangible property. The value of real estate is determined by the land, the buildings constructed on it, and the natural resources it provides (good soil, water, oil, minerals, etc.).
What Are The 3 Types Of Real Estate?
There are three types of real estate that you should know the difference between. When we talk about property values below, these definitions will help you better understand the differences between the increasing and decreasing real estate values.
Commercial Real Estate
Commercial real estate is a property that has been zoned for commercial purposes. For instance, a small shopping center, a warehouse, or an office space would be considered a commercial property.
Residential Real Estate
Residential real estate consists of single-family and multi-family housing units. These pieces of land are zoned for residential development and are designed to be lived on.
Land is the simplest of all. This term refers to empty, undeveloped land. It's usually not connected to the existing electric/water grid. It can potentially be turned into commercial real estate or residential real estate, depending on any local zoning laws.
What The 2021 Real Estate/Property Market Looks Like
Despite the expected inflation and loss of jobs, a recent Zillow report actually shows that property values are increasing. The highest area of growth is predicted in residential housing listings. This means that if you purchase a home now (in the first quarter of the year), then you may stand to profit from your investment!
Zillow's research team predicted that housing prices could rise anywhere between 10% and 13.5% by the end of 2021, showing a positive upward trend.
Commercial listings, on the other hand, could decrease in value. This is especially true in the retail sector. Many of the local brick-and-mortar shopping centers and properties that held communities together are going out of business as more people opt to shop online. Malls are becoming vacant, and shopping centers are falling into disrepair.
Is There A Difference Between Single-Family and Multi-Family Listings?
Both single-family and multi-family housing listings are set to increase. That being said, there is definitely going to be some lateral movement. Those who didn't fare so well during quarantine may be seeking cheaper homes or apartments, while those who came into the new year strong may be moving up to a larger home or moving to a new location for more job opportunities.
Is The Value Of Land Increasing Along With Homes?
Land will always be a valuable asset. However, the market value of undeveloped land isn't going to increase quite as rapidly as homes’ value. This is because the large development companies that would have purchased the land are holding back in the face of an uncertain economic future.
How To Assess Property Values
We could talk about property values until we're blue in the face. However, the only real way to assess certain properties’ value is to use an MLS database (if you're a real estate agent) or a third-party data site.
One of the best sites is PropertyProfileReport.com. Here, you'll be able to see the latest information about any residential or commercial property in all 50 states. Simply select the state, city, and zip code, and you'll be presented with the same information that realtors see on their MLS systems.
You can view information about the surrounding area/school district, check the house’s last-recorded price, estimated property taxes, and more!