Housing Prices At All-time High: When’s The Drop?

In 2018, our team member Dan was convinced that the time was right to stop renting, and start owning. He had no idea how right he was, considering the direction our world went just a year and a half later. At the time he was living in a nice little apartment in what we call the midtown area. He was close to restaurants, bars, shops, public parks, and friends. But he had this feeling he couldn’t shake, that if he didn’t become a homeowner soon, he’d regret it.

ORIGINAL STORY: Link

Within a couple of months, he had purchased his first house. He had given up the youthful vibe in midtown for a quiet neighborhood across the river. He was still close to work, and a few friends who had taken the same plunge. But gone were the short walks at night back from the bar, and the short walk the next morning to get coffee. But he was content with that because he felt like it was the smart move in the long run.

Boy, oh boy, was he right about that.

THEN AND NOW

It’s now the tail end of 2021 and the estimated cost to buy this same house(if he were selling) is almost $100k more. The housing market in the US continues to rise. In September a report was published by S&P Dow Jones Indices (S&P DJI). It revealed that housing prices in the US continue to rise. In fact, July of this year was the 4th consecutive month in which the growth rate of housing prices set a record. Twenty cities were reviewed, and the data showed a 19.9% year-over-year gain.

Seventeen of those twenty cities reported a higher price increase as of July 2021 versus the same time last year. According to Craig Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI, “July’s 19.7 price gain for the National Composite is the highest reading in more than 30 years of data.”. It’s also worth noting, that New York, Boston, Charlotte, Cleveland, Dallas, Denver, and Seattle recorded their all-time highest 12-month gains. Something is happening to the housing market, that seems great on paper. But under more scrutiny, it may be cause for concern.

CAUSE AND EFFECT

On a long enough timeline, these price increases might seem natural and make sense. After all, real estate is typically one of the safest bets there is, right? But this much growth, so fast, is anything but natural.

So what’s caused it? A popular theory that was gaining traction at the start of 2021 has been all but confirmed thanks to the results of that report. That it’s being driven in part by a reaction to the COVID pandemic, as buyers move from urban apartments to suburban homes. This makes a lot of sense when you think about the various reasons why a global pandemic might be moving people to leave their apartment and buying a house.

Here are just two big factors I can personally attest to…

COST

Not long after settling into his new house, he heard from friends about their rent going up back in the old neighborhood. This news repeated itself the next year, and he found himself thankful that he was locked into a set mortgage payment of his own. When the pandemic hit, much like many others, he experienced financial difficulties.

Thanks to COVID assistance regulations he was able to essentially pause his mortgage payments temporarily while he figured things out. His friends renting expensive apartments weren’t so lucky. There was no pausing their rent because their landlords couldn’t pause all of the expenses they incur from running a rental property. He couldn’t help but wonder how far up the (expletive) creek he’d be if he were still renting when all of this went down.

No doubt people who hadn’t already made the move to own were in that creek, struggling to swim. For those lucky enough to make it out and get back on their feet, I’m sure they immediately began planning how they can never be in that position again. Owning their own home suddenly began sounding like a really good idea.

COMFORT

How many people do you know that went stir crazy, cooped up in their apartment for an entire year? Or worse, their studio, or even just a bedroom in a shared space? I can’t imagine. We all struggled with feelings of claustrophobia ourselves, and we mostly had an entire house to stretch out in. So set cost aside, and imagine for a moment being confined to a small living area, one you might even share with others. A small area that now serves as your all-in-one refuge, for work, play, eat, sleep, etc.

People got sick of being in that predicament real fast!

So when the dust started to settle, and hope shined through, one of the first things on their minds was “I need my own space, and I need more of it”. People renting a room with other people suddenly had a strong desire to not share their bathroom, kitchen, living room, etc. People with their own apartment suddenly wanted a backyard and a garage to call their own. Hence, the migration from rented spaces to owned properties. Owners and agents saw this exodus coming, and now the market is reflecting this amplified desire to own our own spaces.

QUESTIONS WITH NO ANSWERS

But will it last? Are we in a bubble, and if so when will it burst? Or will it just keep growing and there will never be a better time to buy? We can’t answer these questions with certainty because there are too many other questions. Is COVID going away for good? Will things return to how they once were or is this truly “the new normal”? And what of those rumors of an impending financial crisis?

Our own president has recently warned of inevitable hardships. The stock market and its effect on our economy have never been so publicly scrutinized. How will all of these factors affect the housing market in the months and years to come? It’s easy to say time will tell.

But as Bob Dylan once said, “the times they are a-changin’”.

THE FUTURE IS BRIGHT WITH VIRTUAL ASSISTANTS

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When we’re not reporting and discussing important topics like the growing housing market, we’re supporting growing businesses. With proven, reliable, highly skilled virtual assistants at competitive prices. To learn more simply follow this link, and request a free one-on-one consultation.

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