The hospitality industry has been hard hit in the pandemic, as shutdowns and the lack of travel have prompted a surge in vacancies. But investors are swooping in to buy hotels and reimagine them as more than just short stays.

Instead, hotel conversions are becoming a bigger business as investors look to buy hotels and turn them into rental apartments. Investors are buying struggling or foreclosed properties at bargain prices and “looking to profit from rising demand for cheap housing from households forced to downsize during the recession,” The Wall Street Journal reports.

Nearly 20% of hotels with securitized mortgages are delinquent on their loans, as of November, according to data from Trepp LLC. That is up from 1.52% a year ago.

“We consider ourselves a building recycling company,” Dan Norville, president of Vivo Living, told The Wall Street Journal. Since the pandemic, Vivo Living has been working on three hotel conversion projects in Mesa, Ariz.; South Bend, Ind.; and Winston-Salem, N.C. It plans to buy a fourth hotel in San Antonio, Texas, early next year.

Extended-stay hotels are ideal for turning into apartments, Elan Gordon, principal of SHIR Capital, a real estate investment company, told The Wall Street Journal. The firm has converted hotels into apartments throughout South Carolina and Texas. Extended-stay hotel units already have kitchenettes built into them, he notes.

But these types of conversions can take time, as they sometimes require zoning changes. Also, hotel rooms are usually not large enough to be qualified as a housing unit under most current zoning laws and must be adapted.

An increasing number of homeowners’ mortgages are in forbearance as more owners take advantage of COVID-19 relief assistance from lenders before the end of the year.

About 37,000 more mortgages were added to forbearance during the week ending Dec. 15, bringing the total to 2.787 million loans. That represents about 5.3% of the nation’s 53 million total mortgages, according to data from Black Knight.

The number of FHA and VA loans in forbearance rose by 18,000 to 1.139 million, a 9.4% share, Black Knight says. For comparison, only 3.2% of Fannie Mae- and Freddie Mac-backed loans are in forbearance.

Borrowers with loans insured by the Federal Housing Administration originally were told they needed to contact their lender to request forbearance before Dec. 31, which may help explain the uptick in requests this month. But the FHA announced Monday that it was extending that deadline to Feb. 28, 2021.

Borrowers can request an initial 180-day period of forbearance and then a 180-day extension. Borrowers don’t have to make any mortgage payments during their forbearance period. They can make up those missed payments over time by working out a plan with their lender once their forbearance period has ended.

More than 550,000 forbearance plans are set to expire at the end of December, according to Black Knight data.

As for homeowners exiting forbearance, many are having their home loans modified by changing the terms of their mortgage and are able to bypass refinancing, The Motely Fool reports.

Meanwhile, foreclosure activity remains low as moratoriums remain in place. The Federal Housing Finance Authority and Department of Housing and Urban Development announced Monday that they have extended moratoriums on evictions and foreclosures for holders of single-family mortgages through Feb. 28, 2021. The moratoriums were originally set to expire on Dec. 31. Fannie Mae and Freddie Mac have made similar extensions, which prevents homeowners from being foreclosed on during the specified period.

“Extensions ensure borrowers can continue to seek assistance and avoid eviction and foreclosure while maintaining temporary policy flexibilities for lenders and servicers,” the FHA said in a statement.

The Consumer Financial Protection Bureau offers a dedicated webpage for homeowners who are struggling, with mortgage and housing assistance options during the pandemic.

Predictions for the 2021 Rental Market

Many renters have transitioned into homeownership during the pandemic, and rental demand and prices are dropping in major cities like New York and San Francisco, ApartmentList reports. “The pandemic is likely to change the expectations and behaviors of renters for an extended period, as people grew accustomed to conducting virtual real estate tours and finalizing leases and other financial transactions at home so they could easily social distance,” ApartmentList notes in a new report that looks at rental trends heading into 2021. Among the trends the online rental marketplace expects to dominate in the new year:

Rental prices to flatten for first half of year. Prices for apartments will likely stabilize during the first half of 2021, reflecting the still-high number of Americans who have lost work due to business shutdowns because of the pandemic. “Overall, multifamily markets have remained tight from an occupancy perspective, even as rent growth has been weak to negative as operators focus on renewals,” Brad Dillman, chief economist at multifamily investment and management firm Cortland, told ApartmentList. “As a result of this resiliency, we expect rent pressures to rebound in the second half of next year. This rebound appears sustainable given the relative strength of the employment recovery as it, in turn, is likely to slow.” Rental prices likely will be weakest in dense urban areas, while suburban sunbelt areas likely will see small increases in rents.

Affordable housing demand will grow. “Given the undersupply of housing, estimated by ourselves and others, it is possible the country will see a renewed focus on housing affordability narratives as rent growth pressures resume next year,” Dillman told ApartmentList. Also, new construction is facing delays. Evictions likely will grow in the first and second quarter of next year as the national moratorium, which Congress is likely to extend through January, expires. Demand for affordable housing will likely grow as more people look for one-bedroom apartments in suburban areas, predicts Freddie Zamani, CEO of EcoSmart Builders, a construction company.

Remote work influences addresses. As remote work grows more commonplace, Americans may be more enticed to move. “We don’t anticipate job seekers placing as much emphasis on location as it relates to their commute as in years past,” Dillman says. But as cities may lose residents, rental prices may fall sharply as a result. Americans will “slowly but surely” be attracted to city life once again as prices moderate, the report notes.

Tout those smart-home features in listings. More than a third of young Americans say they’re more interested in smart-home tech for safety and security, energy efficiency, and entertainment and relaxation since the COVID-19 pandemic, according to a new survey from realtor.com®.

Overall, a quarter of Americans say they’re more interested in smart-home technology now that they’re spending more time at home. Forty-one percent of smart-home technology owners say they’ve bought at least one device since the coronavirus outbreak began. The interest has been highest among 18- to 34-year-olds, according to realtor.com® and YouGov, which surveyed more than 2,000 Americans earlier this month to learn their thoughts on smart-home technology.

“The survey results show that many Americans, especially younger people, are leveraging smart-home technologies to enhance their quality of life, even more so now that most of us reshaped our homes into live, work, learn, and play spaces,” said George Ratiu, realtor.com®’s senior economist. “In a year defined by a global pandemic, and fraught with civil unrest and economic volatility, it’s not surprising that people are prioritizing the safety and security of their home, their finances, and having a comfortable place to relax and unwind.”

Indeed, security-related smart-home products topped consumers’ lists. Survey respondents said smart-home features that could even make new homes more desirable include a smart doorbell with a camera and a high-tech security system. About 21% of respondents also said they’d be willing to pay more for a home with a high-tech security system or a smart doorbell with a camera.

Some additional highlights from the survey:

• When respondents were asked to select just one smart-home feature to add to their home, the majority chose a high-tech security system.
• More than half—or 57%—of all consumers surveyed and 61% of those 18- to 34-year-olds already own some smart home technology. The most common products owned are smart TVs, smart-home speakers, smart doorbells, robot vacuums, and connected climate control systems and smart thermostats.
• On energy efficiency preferences, consumers said a feature that would make a new home more desirable would be solar roof tiles, a home battery pack to store solar energy, and standalone solar panels.
• On entertainment, 26% of consumers said a high-tech home theater and 18% said TVs that pop up out of dressers or drop down from the ceiling are features they say would make a new home more desirable.

This week marked the 15th record low for mortgage rates this year. The 30-year fixed-rate mortgage dipped further to an average of 2.67%, the lowest rate ever recorded by Freddie Mac, with records dating back to 1971.

“The housing market continues to surge higher and support an otherwise stagnant economy that has lost momentum in the last couple of months,” said Sam Khater, Freddie Mac’s chief economist. “Mortgage rates are at record lows and pushing many prospective home buyers off the sidelines and into the market. Homebuyer sentiment is sanguine and purchase demand shows no real signs of waning at all heading into next year.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 17:

• 30-year fixed-rate mortgages: averaged 2.67%, with an average 0.7 point, falling from last week’s 2.71% average. This time last year, 30-year rates averaged 3.73%.
• 15-year fixed-rate mortgages: averaged 2.21%, with an average 0.6 point, falling from last week’s 2.26%. A year ago, 15-year rates averaged 3.19%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.79%, with an average 0.3 point, unchanged from last week. A year ago, 5-year ARMs averaged 3.36%.

Freddie Mac reports points along with average commitment rates to better reflect the total upfront upmost of obtaining a mortgage.

Fewer investors are taking on home flips during the pandemic. But many of those who’ve stayed with it are seeing profits rise.

The number of home flips dropped again in the third quarter, comprising only 5.1% of all home sales, ATTOM Data Solutions reports. Home flipping reflects a transaction in which the property is bought and sold within 12 months.

The gross profit on a typical home flip nationwide—which is the difference between the median sales price and the median paid by investors—increased to $73,766, the highest amount since at least 2000, ATTOM Data Solutions reports. That also is up significantly from $61,800 in gross profits recorded a year ago.

The markets seeing some of the highest home flipping profits in the third quarter compared to a year ago were Brownsville, Texas (return on investment up 182.9%); Austin, Texas (up 176.4%); Waco, Texas (up 157.4%); and Springfield, Mo. (up 145.3%), according to the report.

“Home-flipping again generated higher profits on less transactions across the United States in the third quarter of 2020 as investors continue to make more money on a declining number of deals,” says Todd Teta, chief product officer at ATTOM Data Solutions. “This all happened in the context of the pandemic, which has created unusual circumstances for the housing market to thrive, and that has included the home-flipping business. Too much is uncertain these days to say whether the latest trends will continue. But for now, the prospects continue looking up for home flipping after a period when they were trending the opposite way.”

Home flipping as a portion of sales was down in the third quarter in 93% of the 159 metro markets that ATTOM tracks. The largest quarterly decreases in the home flipping rate nationwide occurred in Killeen, Texas (where the rate was down 44.5%); Savannah, Ga. (down 43%); York, Pa. (down 42%); and Greeley, Colo. (down 41.5%).

On the other hand, the largest increases in home-flipping rates occurred in Davenport, Iowa (up 18.5%); Hilton Head, S.C. (up 16.8%); Scranton, Pa. (up 12.2%); Amarillo, Texas (up 10.9%); and Kalamazoo, Mich. (up 7.7%).

Some additional highlights from ATTOM Data Solutions’ latest report:

• Homes flipped in the third quarter were sold for a median price of $240,000. The median investor purchase price was $166,234.
• The highest home flipping profits measured in dollars tended to mainly be in the West and Northeast, led by San Jose, Calif.; Ventura, Calif; Los Angeles, Calif.; and San Francisco.
• About 57% of homes flipped in the third quarter were purchased with all cash, up from 51% a year earlier.
• Home flippers who sold in the third quarter took an average of 192 days to complete the transaction, which is the highest level since the third quarter of 2003, ATTOM Data Solutions reports.

The stress of 2020 is causing an overhaul in home design. For example, open floor plans are now being considered too open as households seek privacy for work and school while everyone is at home. As a result, home offices are growing in demand in buyers’ home search.

Real estate and design experts recently shared with realtor.com® some of the biggest home design trends likely in the new year, including:

Separated spaces.

Open floor plans are getting divided up. Homeowners are looking to create nooks or pockets for Zoom calls, lounging, exercising, and e-learning, design experts say. “New buyers are asking for homes with more separation, as sometimes multigenerational families share a home and need space and privacy amongst themselves,” Yorgos Tsibiridis, a broker at Douglas Elliman in the Hamptons, told realtor.com®.

Biophilic design.

Homeowners are craving nature in the pandemic and are bringing in more houseplants and indoor gardens. “During the pandemic when it was difficult for some to get their daily dose of nature, people started bringing the outdoors in with natural materials in their home,” Julie Busby, founder of the Busby Group at Compass in Chicago, told realtor.com®.

Wood-grain elements in the kitchen.

Wood-grain kitchen cabinets and counters are trending, offering a touch of organic and natural materials. Bill Darcy, CEO of the National Kitchen & Bath Association, told realtor.com® this may be another sign of tying home design elements to nature. Instead of all-white kitchens or painted cabinets, more homeowners are adding in wood-grain cabinets and wood countertops on to their kitchen islands, designers say.

Outdoor solitude.

Fireplaces, fire pits, patios and decks, screened-in porches, and outdoor kitchens have all gained popularity during the pandemic. The outdoor kitchen is particularly trending, as homeowners add outdoor refrigerators and dining areas in their backyards or create a more elaborate space that includes a fully equipped kitchen outside with a stovetop and appliances.

Bathrooms get smarter.

Smart home innovations are increasingly entering the bathroom.

“Touchless appliances, including motion sensors for lighting, and smart temperature control for bathroom floors will be more popular in the next year,” Darcy predicted to realtor.com®.