Remember in 2020, when everyone was so excited for 2021, “when all of this instability and uncertainty will be over”? Right. Well, while there was some relief from pandemic pandemonium as Americans started to get vaccinated against COVID this past spring and summer, the virulent delta variant threatened to override the country’s hard-won progress and untold sacrifices. And while the overall economy seems to be on an upswing with businesses reopening and consumers more inclined to leave their bubbles to make purchases, the major economic shifts needed to make enduring investments in our infrastructure, institutions, and the future of our planet are just starting to emerge from a Congressional quagmire.
What did all this mean for the multifamily market in 2021, and where do the pros see things heading in 2022? In a nutshell, it’s still a topsy-turvy world out there. Cities, which some declared ‘dead’ when population density was thought to be a major driver of coronavirus contagion, have shown a strong homebuying revival in recent months as lockdowns and restrictions eased and vaccinations continue to be administered. The bidding wars that sent suburban home prices skyrocketing in 2020 and early 2021 have resumed in the urban markets—even in the luxury sector, which dipped significantly when the pandemic and other economic factors chilled high-end homebuying.
Adding to all this complexity is the reckoning that has come in the wake of the tragic collapse of the Champlain Towers South condominium in Surfside, Florida, this past June, which has prompted a wave of reforms and a recognition of the advancing age of a large portion of the country’s housing stock, as well as the role that climate change plays on structural integrity and the pitfalls of deferring building maintenance for the sake of short-term financial savings.
It’s the Economy, Stupid
Every bit as true as it was 20 years ago when campaign strategist James Carville made it a central theme of Bill Clinton’s successful bid for the presidency, the U.S. economy dictates the country’s direction. In terms of residential real estate, overall economic conditions are both a driver and a byproduct of transactions. A confluence of several economic factors played into the rollercoaster year that 2021 was, and is likely to keep 2022 dizzying as well.
According to residential real estate expert Jonathan Miller, president of New York-based appraisal firm Miller Samuel, the urban exodus brought about by the COVID-19 pandemic was preceded by more of a trickling, starting in 2018 when the Trump administration lowered the cap on the amount of state and local tax (SALT) deductions allowable on federal income tax returns. This legislation inspired residents of high-tax states like New York to take up residency in states like Florida with lower taxes, especially those from Manhattan, “because of the greater wealth and mobility [there] than any other market in the region,” says Miller. “During the lockdown, there was a tremendously significant pattern of outbound migration—not just to the suburbs, but anywhere in the United States, driven by the SALT tax.”