Analysists predict that the COVID-19 pandemic is anticipated to alter the future of real estate. One of the early indicators we are experiencing today has been the sudden increase in demand for remote luxury living in markets across the states. This is an interesting shift, given that it contradicts trends the U.S. has been following for more than a century. On average, the U.S. witnesses about a 5% increase in urbanization each decade, and in 2010, the U.S. had become 80% urban; however, reports are forecasting that COVID-19 will start to reduce these statistics and consumers will shift to more remote living.
This trend is most prominent today in luxury living. For example, we have all heard news reports highlighting the wealthy individuals waiting out the pandemic on luxury estates in rural New Zealand. However, technology may allow a more remote lifestyle for homeowners other than the extremely wealthy. As the growing sense of doomsday-ism swept the country and emptied store shelves, the majority of our workforce went home to telecommute. Real estate professionals began to see growing interest in remote property. Buyers are even showing interest in more rural regions of the country, perhaps because COVID-19 concentrates in dense urban centers like New York City. A study conducted by Redfin found that as of March 23, the seven-day average of online views of home listings in rural areas increased by 115% year over year, and by 88% year over year for homes in small towns. Page views for properties in cities with populations of more than 1 million were down 10% in the same period.
The luxury rental market could also hold some clues to the future of real estate. The severity of the outbreak in New York City caused the rental market in the Hamptons to boom, several months in advance of the usual summer high season, with a 33% increase in searches for short-term rentals in a month. Data retrieved by Airbnb analysis website AirDNA also shows that short-term renters are fleeing densely populated cities for more rural areas as COVID-19 cases spread.
Across the country, demand is soaring for luxury real estate in remote and uncrowded wilderness as well. Phil Wood, the president of the John R. Wood Properties brokerage in Naples, confirmed that the virus has made remote and spacious properties more appealing for affluent buyers.
“We think that we’re going to see increased interest from cities that have been hit hard by the COVID-19 virus,” Wood said. “There will be people who want to bail out and go live in a smaller area that’s not loaded with virus issues.”
Wood’s brokerage serves southwest Florida where the high cost of land makes sprawling properties hard to come by. Despite the cost, Wood has seen increased interest in real estate on nearby islands such as Sanibel, Marco, and Captiva. These islands are cut off from mainland Florida, sparsely populated, and home to multi-million-dollar estates. Built for people who truly enjoy isolation, these mansions typically feature their own power generators, acres of land, trails, and beaches. Jeffrey Burns, the Sotheby’s International agent representing one such property said “I started to get calls from a few of my customers who live in big cities… They are thinking of either getting a second [home] or moving somewhere that is not quite as populated. I definitely think that is going to become a trend.”
In other parts of Florida this trend is repeating itself. A sprawling hunting estate in a remote part of southeastern Florida just hit the market for a whopping $25 million. Located on the edge of Lake Okeechobee, the property boasts a spacious 5,000-square-foot main house along with numerous lodges, cabins, and private hunting grounds. The 3,150-acre estate is a remote hunting and sports ground more than an hour outside of Palm Beach. However, a nearby regional airport accommodates private jets, a draw for wealthier homeowners who charter planes amid the pandemic. If the estate sells for its asking price, it would crush the previous county real estate record of $16.36 million.
Across the nation, agents are seeing an increase in demand. In remote parts of California like Big Sur, where many properties previously lingered on the market, there has been a spike in the number of inquiries for luxury properties, some of which can only be accessed by ATV or on foot. John Campbell, the Christie’s International Real Estate listing agent said:
“My original thought was we would experience increased demand in larger properties ‘off the grid’… It’s gone way beyond that, up to and including buyers opting out of exotic vacations and into purchasing their own ‘controllable’ paradise.”
In Connecticut, a secluded 1.1-acre island with a 3,781-square-foot house, swimming pool, and private dock went up for $4,900,000. Across the country in New Mexico, an isolated 3.41-acre estate overlooking Santa Fe in the Sangre de Cristo Mountains just listed for $9.75 million. Campbell said that online interest in the island grew from an average of 25 hits a day before the pandemic to about 250 hits a day as the coronavirus progressed. These are just a small sample of indicators that demand for secluded real estate could be soaring amid a pandemic that has prompted homeowners and renters to escape densely packed cities.
The shift from urbanization toward investment in rural homes is expected to continue, which means sellers of high-end properties in remote areas may want to keep their listings up during the coronavirus crisis. It has become increasingly likely that the effects of COVID 19 will have a lasting effect on the luxury sector and that buyers will long be enticed by the promise of escaping urbanity.
When it comes to urban migration, even at this early stage, the economic effects of the COVID-19 pandemic for urban areas seem likely to resemble those of the Great Depression more than the Great Recession. As cities shut down for social distancing, service jobs will disappear, like industry jobs did in the 1930s, and office jobs will go remote, resulting in a shift in consumer needs.
The uncertainty around how long it will take to contain the pandemic and economic volatility makes it difficult to predict trends precisely. However, it is apparent that investors are seeking spacious and isolated properties. It is also likely that the trend will continue after the crisis passes. Middle class markets may join the movement all while companies discover the power of telecommuting and working from home.