US homebuilding surges as coronavirus sparks flight to suburbs, rural areas(reuters.com)
reuters.com
US homebuilding surges as coronavirus sparks flight to suburbs, rural areas
https://www.reuters.com/article/us-usa-economy/u-s-homebuilding-surges-as-coronavirus-crisis-sparks-flight-to-suburbs-rural-areas-idUSKCN24I1OY
215 comments
>None of the developers would have been able to find land, make deals, develop projects,
The tract builders already bought and developed the land (e.g. ~100 parceled lots) before COVID but the individual lots were unsold. The "housing starts" statistics are official US Department of Commerce data instead self-reported numbers by homebuilders so it's very possible that there was a real uptick in selling off those unsold lots that were previously moving slowly.
E.g. See satellite photo of two neighborhoods in suburbia under development by a tract builder like Toll Brothers:
https://www.google.com/maps/search/toll+brothers+neighborhoo...
... and the street view shows the showcase model home and the construction equipment already building on those lots:
https://www.google.com/maps/@41.0783819,-74.1180052,3a,75y,1...
Multiply that type of scenario happening all over the country and getting accelerated by coranavirus fears. A builder can get heavy equipment out on the empty lot within a few weeks after a new house contract is signed.
I do agree that skepticism is warranted. We should be seeing parallel stories of falling prices of city apartments and condos.
The tract builders already bought and developed the land (e.g. ~100 parceled lots) before COVID but the individual lots were unsold. The "housing starts" statistics are official US Department of Commerce data instead self-reported numbers by homebuilders so it's very possible that there was a real uptick in selling off those unsold lots that were previously moving slowly.
E.g. See satellite photo of two neighborhoods in suburbia under development by a tract builder like Toll Brothers:
https://www.google.com/maps/search/toll+brothers+neighborhoo...
... and the street view shows the showcase model home and the construction equipment already building on those lots:
https://www.google.com/maps/@41.0783819,-74.1180052,3a,75y,1...
Multiply that type of scenario happening all over the country and getting accelerated by coranavirus fears. A builder can get heavy equipment out on the empty lot within a few weeks after a new house contract is signed.
I do agree that skepticism is warranted. We should be seeing parallel stories of falling prices of city apartments and condos.
Which we have started to see within the Bay Area and other higher rent areas.
The really interesting thing to watch will be commercial real estate, but those leases are longer & either impossible or expensive to break. We’ll see how the remote culture change impacts commercial real restate and if companies stop signing new leases & don’t renew them either once they run their course.
The really interesting thing to watch will be commercial real estate, but those leases are longer & either impossible or expensive to break. We’ll see how the remote culture change impacts commercial real restate and if companies stop signing new leases & don’t renew them either once they run their course.
>those leases are longer & either impossible or expensive to break
Unless a small business, e.g. restaurant, simply goes out of business. As is happening all over the place.
Unless a small business, e.g. restaurant, simply goes out of business. As is happening all over the place.
My prediction is that commercial real estate is in for a bad time. The shift to remote work appears to be sticking enough that plenty of businesses are going to be really questioning thier facilities budget, and I doubt food or personal services are going to fully recover quickly. I have no idea what retail will do, but it had issues before the crisis.
Yeah different scenario than I was talking about. I’m thinking the 50,000+ square foot commercial properties that are on 5-10 year leases
Anecdotally I have heard that a lot of commercial projects have recently been suspended so there are also more construction works available for residential work.
I'm in the architecture field. We work on single family, multifamily, clubhouses and student housing on a national scale with some of the largest builders in the USA. I can tell you that we are very busy with current and new projects in the pipeline. I can't explain what people are doing, this is just to give perspective from the architectural point of view.
I just spoke with a coworker who used to live in Chicago and moved to the suburbs. He said that homes in his neighborhood have been selling quickly and prices are increasing exponentially. The condo in the city he sold in February is the last to sell. Six are on the market.
I just spoke with a coworker who used to live in Chicago and moved to the suburbs. He said that homes in his neighborhood have been selling quickly and prices are increasing exponentially. The condo in the city he sold in February is the last to sell. Six are on the market.
Just a second anecdata point. I was looking for a plot of land for the past few years. I'm not going to say where, but let me just summarize that I have been monitoring pretty much all the areas I've travelled (roughly 1/6 of the US) to just in case something nice popped up. The available land options have quite astonishingly disappeared starting in February. The ones that remain are bad ones (next to trains or under an airport landing) and even those have prices going up. In some areas there is literally nothing left, and when one does pop into the market, the price is about DOUBLE what it was a year ago.
I don't have like any analytics on this, but I'm sure Zillow could easily produce something.
Also just in case people are wondering, for land with a house, I see a trend where the listings are marked up about 100k more than it was a year ago. The actual sales price of those listings isn't kinda available yet for much of the pandemic (since that data lags behind the when it drops off the market a few months). But a year ago if you saw a house at 200k it will sell at 200k. 300k will sell at 250, 400 will sell at 320, 500 will sell at 400, 600 will sell 450ish (you get the idea). I have the feeling that the speed at which 500k rural homes are selling that they are going for very close to asking now.
I don't have like any analytics on this, but I'm sure Zillow could easily produce something.
Also just in case people are wondering, for land with a house, I see a trend where the listings are marked up about 100k more than it was a year ago. The actual sales price of those listings isn't kinda available yet for much of the pandemic (since that data lags behind the when it drops off the market a few months). But a year ago if you saw a house at 200k it will sell at 200k. 300k will sell at 250, 400 will sell at 320, 500 will sell at 400, 600 will sell 450ish (you get the idea). I have the feeling that the speed at which 500k rural homes are selling that they are going for very close to asking now.
Another COVID related reason for land being snapped up might be shifting of investment preferences away from stock and corporate/municipal bonds. Land with long term development potential is a relatively safe bet if you're prepared to hold it for long enough.
> But a year ago if you saw a house at 200k it will sell at 200k. 300k will sell at 250, 400 will sell at 320, 500 will sell at 400, 600 will sell 450ish (you get the idea)
I have not seen this in suburbs of cities in the Rocky Mountains or West coast. If anything, the houses would sell for more than list price for anything in the $500k to $1M range.
I have not seen this in suburbs of cities in the Rocky Mountains or West coast. If anything, the houses would sell for more than list price for anything in the $500k to $1M range.
In Southern California, I'm seeing prices remain about the same and just recently start to fall a bit.
A lot of people are taking property off the market right now rather than drop the price severely.
I'm sure there are exceptions, but I don't think that many people are buying houses right now. Most people are in a wait and see mode.
A lot of people are taking property off the market right now rather than drop the price severely.
I'm sure there are exceptions, but I don't think that many people are buying houses right now. Most people are in a wait and see mode.
I was referring to the previous commenter's claim of houses selling for less than list price a year ago.
We have some fairly big developments in my mostly suburban area that take years to build out. The building sites are already prepped and permitted, so they can increase the build rate somewhat dynamically. Since it looks like we are only talking about 10000 extra starts in a month I find it believable there is enough supply to react to an increase in demand for home building.
Anecdotally, I know one family that just bought a plot of land in Westchester County (moving out of Manhattan). And this pandemic has accelerated my wife & my house hunt, though we were already thinking of doing it beforehand. But you're right - these are either land purchases or people thinking of buying a home, not actually doing it. There isn't enough time to have gotten through the surveying/planning/permitting process since coronavirus started, all of which proceed much more slowly since everyone is closed or working remotely.
Another possibility is that this is reflecting speculative demand. Developers who already own land and have plans drawn up accelerate the process, because they anticipate people will want to move out to the suburbs, and besides financing is cheap now. Whether this'll pay off depends a lot on how the situation evolves - historically pandemics have hit urban areas first but later migrated to the outskirts and then rural areas, and eventually nobody is safe.
Another possibility is that this is reflecting speculative demand. Developers who already own land and have plans drawn up accelerate the process, because they anticipate people will want to move out to the suburbs, and besides financing is cheap now. Whether this'll pay off depends a lot on how the situation evolves - historically pandemics have hit urban areas first but later migrated to the outskirts and then rural areas, and eventually nobody is safe.
> though we were already thinking of doing it beforehand.
I think we’re seeing a lot of this effect, and it’s under appreciated.
I’ve been thinking of buying a canoe for a while, and suddenly everyone else that was has been motivated to jump into action.
Result: canoes are hard to get.
Also add up the free time from other things being closed, vacations cancelled, work slowdowns, as well as the new liquidity of time offered by work-from-home... any outlet for that has huge demand now.
I think we’re seeing a lot of this effect, and it’s under appreciated.
I’ve been thinking of buying a canoe for a while, and suddenly everyone else that was has been motivated to jump into action.
Result: canoes are hard to get.
Also add up the free time from other things being closed, vacations cancelled, work slowdowns, as well as the new liquidity of time offered by work-from-home... any outlet for that has huge demand now.
I had this problem with getting a close-up filter for my lens. They're a cheap way to get into macro-ish photography, and suddenly everyone with a camera needs a way to keep shooting with fewer places to go. My filter just shipped after two months on backorder.
And you'll probably have trouble getting just about anything related to videoconferencing like high-end webcams, key lights, popular USB microphones, good office chairs, HDMI converters, etc.
> so people are leaving the cities where they appear to have careers/work/friends and are heading to the suburbs during lockdown because of the virus situation, while businesses are laying off and contracting/shrinking/making losses and are going out of business?
This is completely anecdotal, but I know a few people who have left urban centers recently to go to suburbs. And I know a bunch who are looking to. Over time this might even out... i'm sure many people, particularly those with young children, have been considering the move and now they have an impetus.
This is completely anecdotal, but I know a few people who have left urban centers recently to go to suburbs. And I know a bunch who are looking to. Over time this might even out... i'm sure many people, particularly those with young children, have been considering the move and now they have an impetus.
More anecdotes: I live in the suburbs. Both my neighbors have sold due to suddenly-rising demand in housing. There are for-sale signs everywhere. The people who have already moved in are all from the city (NYC).
Coworkers who live in the city are finding it much less workable to live there when they have to stay in small apartments. You can buy a nice, large house in a nice town for the money you spend on renting a small apartment in the city. When the lease is about up, you can close on a house rather quickly (I sold my last house in NJ in 3 days, closed on the new one as fast as both us and the seller could move our stuff) and suddenly be able to walk around and have a backyard. That kind of fairly-quick life improvement is important. Also, now people will worry about "the next virus" when they're in the city.
The protests outside their doors didn't help.
With employers suddenly becoming rather adept at work-from-home and remote work, the work benefits of stay in the cities have diminished permanently.
Coworkers who live in the city are finding it much less workable to live there when they have to stay in small apartments. You can buy a nice, large house in a nice town for the money you spend on renting a small apartment in the city. When the lease is about up, you can close on a house rather quickly (I sold my last house in NJ in 3 days, closed on the new one as fast as both us and the seller could move our stuff) and suddenly be able to walk around and have a backyard. That kind of fairly-quick life improvement is important. Also, now people will worry about "the next virus" when they're in the city.
The protests outside their doors didn't help.
With employers suddenly becoming rather adept at work-from-home and remote work, the work benefits of stay in the cities have diminished permanently.
Anecdotally I know a number of folks who have either moved out of or are seriously contemplating of moving out of city apartments and purchasing property in relatively rural locations--including people for whom this isn't something they even contemplated previously.
It makes sense. The only reason to live in an urban area is for the social benefits and activities. A small apartment quickly feels like a prison cell when you can't go anywhere or do anything.
But this is nothing new. Better public schools, lower crime, lower taxes (or at least better perceived value), an improved quality of life for a particular lifestyle have always been motivators. It’s harder to establish a career in the suburbs, but relatively easier to maintain one.
COVID has probably made a measurable impact, but it’s very easy to measure small effects too. Whether much has changed long term, I am doubtful.
COVID has probably made a measurable impact, but it’s very easy to measure small effects too. Whether much has changed long term, I am doubtful.
I currently live downtown.
Life is semi-normal, but most of the reasons why I'd want to live down here are disrupted.
Concert halls are closed indefinitely. Meetup.com groups are now all remote. Restaurants will soon allow people to eat inside but will be operating at limited capacity and who knows what it will be like in the Fall/Winter. And now there's way more homeless people living in nearby parks/streets because of the economy/Covid-19 related limits on shelters. Shops are also closing by the week.
You know what I envy from all my friends? Backyards. Just being able to step outside instead of having to don a mask, wait for an semi-empty elevator and walk through public spaces is a big, big advantage. That and having a bigger space for working from home.
I'm planning to move to the suburbs over the next year or so in a large part because of how Covid-19 changed the downtown core.
Life is semi-normal, but most of the reasons why I'd want to live down here are disrupted.
Concert halls are closed indefinitely. Meetup.com groups are now all remote. Restaurants will soon allow people to eat inside but will be operating at limited capacity and who knows what it will be like in the Fall/Winter. And now there's way more homeless people living in nearby parks/streets because of the economy/Covid-19 related limits on shelters. Shops are also closing by the week.
You know what I envy from all my friends? Backyards. Just being able to step outside instead of having to don a mask, wait for an semi-empty elevator and walk through public spaces is a big, big advantage. That and having a bigger space for working from home.
I'm planning to move to the suburbs over the next year or so in a large part because of how Covid-19 changed the downtown core.
The new factor that might tip things is more acceptance of remote work.
Yeah, especially for the more senior folks who can easily afford to build or buy a house and also have the advantage of being able to ensure they can work remotely for the near to medium future (especially with some companies shifting to remote for higher level IC's and some shifting to remote first entirely).
Until urban centers decide to become more family friendly this will continue. Bad inner city schools, traffic, and no wonder families want to get away.
There are plenty of counter examples (mostly Asia). It isn't like this cannot be fixed, but without families nobody as arguing for family friendly things and so people move out when the kids come.
There are plenty of counter examples (mostly Asia). It isn't like this cannot be fixed, but without families nobody as arguing for family friendly things and so people move out when the kids come.
Until urban centers decide to become more family friendly this will continue. Bad inner city schools, traffic.
Chicken, egg; The family that moves to the suburbs (and commutes) IS the traffic and is the economic and brain drain from the city.
Chicken, egg; The family that moves to the suburbs (and commutes) IS the traffic and is the economic and brain drain from the city.
There was a 30 year shift into the cities, so family-friendliness can't explain the trend. This is mostly likely a consequence of the virus.
I agree its a recent phenomenon but it's not just the virus. I was born in raised in the city. I remember the bad old days. I see what's happening with the far left and their want to gut the NYPD and I foresee it backsliding into the bad old days. Crime is already ticking up but it's too early to point at that and say it's happening. It's a longer term projection I am making.
It will unfortunately get worse with all the people and money pulling out of downtown if this continues.
Probably more like 20 years. Boston, for example, was still losing population until the late 90s. (And the last major tech employer at the time also left during the 90s.)
Demographically, you were mostly seeing college-educated young people make up the net inflow over the past 20 years. I suspect that layered over the virus effects, you probably had some demographics who were on the edge of moving anyway--which is one reason that so many of them pulled the trigger fairly quickly.
Demographically, you were mostly seeing college-educated young people make up the net inflow over the past 20 years. I suspect that layered over the virus effects, you probably had some demographics who were on the edge of moving anyway--which is one reason that so many of them pulled the trigger fairly quickly.
It is not just the COVID19 reaction that is driving people to consider leaving the cities but the willingness of public officials to let violent protesters run wild. Those pictures in many big newspapers have lasting effect.
It is one thing to fear a virus you cannot see and another where you have pictures of destroyed businesses and cars.
It is one thing to fear a virus you cannot see and another where you have pictures of destroyed businesses and cars.
I'm surprised this is getting downvoted. A lot of my friends are leaving or considering leaving cities exactly for this reason.
A lot of small businesses got destroyed in riots as well, and I imagine their owners would be leaving too.
A lot of small businesses got destroyed in riots as well, and I imagine their owners would be leaving too.
Yeah, those anti-mask people can get pretty violent. They just lynched a doll of their governor in Kentucky and no one's doing anything about it.
Anti-mask people are non-violent in comparison to BLM and Antifa. There were six murders inside of Seattle'a "autonomous zone" including two minors. Anti-maskers aren't burning city halls, throwing Molotov cocktails into police cars, destroying public and private property, etc. There is no equating the two.
Violence has been a vanishingly small part of what are largely peaceful protests that continue to this day across the country.
Be careful of the media you consume.
It can rot your brain.
Be careful of the media you consume.
It can rot your brain.
I just consume local Seattle media describing multiple murders in the CHOP, all of which were between protesters (or whatever you choose to call people hanging out there), nothing to do with police or right-wingers. If I was living anywhere near, I'd be moving ASAP. I am actually now glad we didn't buy a house closer to transit, like I wanted. We might still decide to move somewhere non-walkable if this continues.
ok
You have a very skewed view of things. Police and insane white supremacists trying to start a "boogaloo" were responsible for starting the violence in several of the protests.
The anti-mask people also have a death count and economic damage on their hands. It's just by way of the pure stupidity of refusing to wear masks in a pandemic, based on stupid myths about how it's to mind-control or harm them, as opposed to being mad police are murdering them and then brutalizing them at protests.
A number of anti-maskers have gotten violent about it, like the guy who rammed a woman with his shopping cart, or the one who stabbed a guy and then suicides by cop trying to stab them, or the other one up in Canada... There are several examples. I'm not excusing violence and lawlessness by people at protests, but you are clearly only seeing the part that supports your worldview, and nothing close to the reality.
The anti-mask people also have a death count and economic damage on their hands. It's just by way of the pure stupidity of refusing to wear masks in a pandemic, based on stupid myths about how it's to mind-control or harm them, as opposed to being mad police are murdering them and then brutalizing them at protests.
A number of anti-maskers have gotten violent about it, like the guy who rammed a woman with his shopping cart, or the one who stabbed a guy and then suicides by cop trying to stab them, or the other one up in Canada... There are several examples. I'm not excusing violence and lawlessness by people at protests, but you are clearly only seeing the part that supports your worldview, and nothing close to the reality.
Read up on murders in the CHOP and nearby. Nothing to do with police or white supermacists. Everything to do with the people in the CHOP, eh, protesters I guess?
I think you're right on that this is a submarine article pushing people to keep the buying market up. My wife and I were flabbergasted when we checked out various online home estimates for our properties and they had gone up. We had fully expected their estimated value to go down 10-20% and then we'd have to wait several years for their value to slowly climb back up.
The data is in the article: housing starts are up from April, but still lower than Feb when this started. You are probably right, that these are mostly projects that were already in the pipeline. But that they are restarting is interesting data.
Housing starts increased 17.3% to a seasonally adjusted annual rate of 1.186 million units last month, the Commerce Department said. The percentage gain was the largest since October 2016. Data for May was revised up to a 1.011 million-unit pace from the previously reported 974,000.
Still, homebuilding remains 24.3% below its February level. The South and the West accounted for about 75% of housing starts last month. Economists polled by Reuters had forecast starts increasing to a rate of 1.169 million units.
Housing starts increased 17.3% to a seasonally adjusted annual rate of 1.186 million units last month, the Commerce Department said. The percentage gain was the largest since October 2016. Data for May was revised up to a 1.011 million-unit pace from the previously reported 974,000.
Still, homebuilding remains 24.3% below its February level. The South and the West accounted for about 75% of housing starts last month. Economists polled by Reuters had forecast starts increasing to a rate of 1.169 million units.
Developments in rural areas are rare. If you want a new home you simply find a piece of land, buy it, and then find a builder to make a house.
That still takes time, but not as much. In my area at least apparently homes for sale are going like hot cakes and prices are through the roof, so people that already live here might be taking the opportunity to sell their old home and build a dream home.
That still takes time, but not as much. In my area at least apparently homes for sale are going like hot cakes and prices are through the roof, so people that already live here might be taking the opportunity to sell their old home and build a dream home.
My Facebook feed regularly gets ads from real estate companies with the same general message. Apparently it’s simultaneously a great time to sell, and a great time to buy?
It's a time of change. Many things are shifting.
Sell to cash in on equity. Buy to get a better house.
Realtors make money either way...so it is a great time for either.
Just as always follow the money.
Just as always follow the money.
I just shared this link on Facebook and got an IMMEDIATE warning that it violated community guidelines... just because it has the word "coronavirus" in the title?
If anything it primarily doesn't have anything to do with Covid. I remembered this article from 3 years ago[1] already discussing the renewed hollowing out of American cities, mostly tied to cheaper gas prices and aging millenials following the recession and the shale revolution.
[1]https://www.theatlantic.com/business/archive/2017/04/why-is-...
[1]https://www.theatlantic.com/business/archive/2017/04/why-is-...
Sure but I have a feeling the no-so-obvious flaws of city living (rapid spread of disease, potential for riots) has really lit a fire under people thinking about moving.
NYC was going through a decline in population even before this, but the other midsized urban areas like Denver and Austin have been experiencing a boom. Unfortunately I think the policy response to Covid has killed all of that. I just moved out of my inner city apartment there. Everything I pay higher rent for is shut down.
As was pointed out many developments are built out over time in sections as demand dictates.
Another factor besides coronavirus is widespread civil unrest. I think the one two punch was enough to make many people start considering it.
My friend’s sister was begging her parents to let her return home from New York during this mess. They told her no.
Another factor besides coronavirus is widespread civil unrest. I think the one two punch was enough to make many people start considering it.
My friend’s sister was begging her parents to let her return home from New York during this mess. They told her no.
> Another factor besides coronavirus is widespread civil unrest.
Also local politicians are coming under pressure to “defund the police” and some are taking the first steps toward that goal.
Also local politicians are coming under pressure to “defund the police” and some are taking the first steps toward that goal.
Amazing that you're getting downvotes; Hackernews is a weird place sometimes. The reality is most people don't want to live around civil unrest (real or perceived).
I'm in Brazil and this is just an anecdote, but my family is quarantined in an apartment, and the wife and I have been arguing because she wants to move into a house now. I'm pretty sure we would already have committed to buy if my mind was the same as hers.
I’m a real estate agent in a rural area approx 5 hours from two coastal cities... what we are seeing is an acceleration of a trend that was already underway pre-Covid. Remote workers and retirees were already coming here, this just pushed the time table for others.
Make sure you understand what the article is suggesting here, because there's more to it than the headline:
> U.S. homebuilding increased in June by the most in nearly four years amid reports of rising demand for housing in suburbs and rural areas...
> Still, homebuilding remains 24.3% below its February level. The South and the West accounted for about 75% of housing starts last month....
> Demand for housing is being supported by cheaper mortgage rates. The 30-year fixed mortgage rate is at an average of 2.98%, the lowest since 1971, according to data from mortgage finance agency Freddie Mac...
> But a resurgence in new coronavirus infections across the country eroded consumer sentiment in mid-July, other data showed on Friday, threatening the nascent housing and economic recovery. Some areas in virus hot spots in the populous South and West regions have either shut down businesses again or paused reopenings.
This is a good article which talks about a lot of the context here: money is cheap, we started re-opening more in some places, construction picked back up in those places. Even with this things are slower than in the winter, and the current recovery is tenuous due to the increasingly obvious need to put the brakes on reopening plans as the virus continues to spread.
> U.S. homebuilding increased in June by the most in nearly four years amid reports of rising demand for housing in suburbs and rural areas...
> Still, homebuilding remains 24.3% below its February level. The South and the West accounted for about 75% of housing starts last month....
> Demand for housing is being supported by cheaper mortgage rates. The 30-year fixed mortgage rate is at an average of 2.98%, the lowest since 1971, according to data from mortgage finance agency Freddie Mac...
> But a resurgence in new coronavirus infections across the country eroded consumer sentiment in mid-July, other data showed on Friday, threatening the nascent housing and economic recovery. Some areas in virus hot spots in the populous South and West regions have either shut down businesses again or paused reopenings.
This is a good article which talks about a lot of the context here: money is cheap, we started re-opening more in some places, construction picked back up in those places. Even with this things are slower than in the winter, and the current recovery is tenuous due to the increasingly obvious need to put the brakes on reopening plans as the virus continues to spread.
> I know several people who have moved out of cities over the last several years actually for various reasons, mostly the accumulating cost and declining benefits, especially with the consequences of political and government policies starting to impact communities along with the overall cost of living increases. This is not a coronavirus trend, even if that has only accelerated things.
Yeah this has been the deal in my area. Millennials were later to start families, but now that they are they're needing more space than they can afford with downtown real estate costs.
If people are moving now I suspect it has to do with interest rates being low enough that it becomes an attractive option financially.
As for declining benefits, that's true too. The initial wave of urbanization involved revitalizing poor neighborhoods by opening up lots of quirky, independent shops. But leases are now high enough that few such businesses can really survive and they're being replaced by large chains or, in other cases, just laying vacant or being occupied by luxury brands that people don't care about having access to on a day-to-day basis.
COVID has just accelerated those marginal business collapsing under the weight of unsustainably high leases/rents.
Yeah this has been the deal in my area. Millennials were later to start families, but now that they are they're needing more space than they can afford with downtown real estate costs.
If people are moving now I suspect it has to do with interest rates being low enough that it becomes an attractive option financially.
As for declining benefits, that's true too. The initial wave of urbanization involved revitalizing poor neighborhoods by opening up lots of quirky, independent shops. But leases are now high enough that few such businesses can really survive and they're being replaced by large chains or, in other cases, just laying vacant or being occupied by luxury brands that people don't care about having access to on a day-to-day basis.
COVID has just accelerated those marginal business collapsing under the weight of unsustainably high leases/rents.
Housing supply is very low in my suburb within a large metropolitan area. Many people are buying. A neighbor recently went on the market and had multiple offers on the first day. I've heard similar stories from a few friends in the Midwest.
Yes, probably a good deal of PR, projection, and reductionism in the headline.
On the other hand, what would you have expected to happen to housing starts during a national period of pandemic and racial unrest? An uptick is surprising.
On the other hand, what would you have expected to happen to housing starts during a national period of pandemic and racial unrest? An uptick is surprising.
It's also hardly a surge in building. It's still well below the pre-pandemic rate. It's just an increase from the sharp decline caused by the pandemic.
Anecdotal, but I have three friends and a coworker who decided to purchase homes in the last few months and all of those purchases were due in part to Coronavirus.
There are definitely markets that are doing well and will continue to do so for a while. Rural housing for sure. This will probably cause a push for some people to move out of the city and into the burbs.
BUT, it's really too early to know what effects this is going to have on the housing market. Right now, most unemployed people are getting fairly generous unemployment benefits. Meanwhile, in many states, you aren't allowed to foreclose right now.
Once the foreclosure moratoriums and unemployment benefits end, it's anyone's guess what's going to happen to housing.
Edit: my uncle is a contractor who builds multi-family residences. I remember he stopped building and moved to house remodeling when there was a building boom in 2006-2008, when he felt that his local market was being overbuilt (turned out to be a great decision in retrospect). Houses being built does not always mean a strong housing market. Plenty of home builders are short sighted.
BUT, it's really too early to know what effects this is going to have on the housing market. Right now, most unemployed people are getting fairly generous unemployment benefits. Meanwhile, in many states, you aren't allowed to foreclose right now.
Once the foreclosure moratoriums and unemployment benefits end, it's anyone's guess what's going to happen to housing.
Edit: my uncle is a contractor who builds multi-family residences. I remember he stopped building and moved to house remodeling when there was a building boom in 2006-2008, when he felt that his local market was being overbuilt (turned out to be a great decision in retrospect). Houses being built does not always mean a strong housing market. Plenty of home builders are short sighted.
I've been semi-closely watching the rural RE market in NorCal lately (both empty lots and very "off-grid" locations) and all I'm seeing right now are price cuts, some very dramatic. Nobody can predict the future but something is definitely changing.
What do they say? Real estate is hyper local.
You can see that in SF right now. Certain neighborhoods (downtown core) are seeing a ton of people leaving and other neighborhoods are seeing increased prices (further from core, higher % of single family homes).
You can see that in SF right now. Certain neighborhoods (downtown core) are seeing a ton of people leaving and other neighborhoods are seeing increased prices (further from core, higher % of single family homes).
How many of the unemployed are wealthy enough to own though?
Canada is facing surging real estate prices and while there are also masses of unemployed, few of those people had the money for home ownership anyway.
Canada is facing surging real estate prices and while there are also masses of unemployed, few of those people had the money for home ownership anyway.
Unemployed people probably aren't buying new homes. But if they are getting unemployment check, they might be paying their mortgages on existing homes. Also, even if they stop paying their mortgages, they can't be foreclosed on in many states. Also, banks are deferring their payments, because it's not in their interests for people to foreclose, but they will only delay those payments for so long. My point is that once those unemployment checks cease and foreclosures resume, prices can drop significantly.
In Oklahoma right now you can be unemployed and earning $58,240 in annualized unemployment pay. That number will drop to $27,040 (still annualized) at the end of July unless the Congress intervenes. However, even $27k in Oklahoma would be enough to afford a small house in the suburbs of a city.
>However, even $27k in Oklahoma would be enough to afford a small house in the suburbs of a city.
Sounds like I need to move to Oklahoma... I'm making about $44k in rural South Dakota but with the way housing prices have been around here the last few years, I am nowhere near being able to comfortably afford a mortgage (I can afford one, for a cheap, old, needs-a-lot-of-TLC-or-30-miles-out-of-town house, but not while also affording much else).
Sounds like I need to move to Oklahoma... I'm making about $44k in rural South Dakota but with the way housing prices have been around here the last few years, I am nowhere near being able to comfortably afford a mortgage (I can afford one, for a cheap, old, needs-a-lot-of-TLC-or-30-miles-out-of-town house, but not while also affording much else).
I have friends who live there and go on and on about the cheap cost of living. I’ve visited and it wasn’t a place I wanted to live. To each their own. It does seem absurdly cheap.
Do lenders let you get a mortgage if your income is unemployment payments that run out in 20 weeks? I would assume not, but maybe there are regulations that require them not to consider the source of the income if its from unemployment.
It’s not unemployed people getting new loans, it’s that they can continue to pay their existing loans preventing foreclosures and a drop in housing prices. Banks absolutely consider source of income, length of employment, type of employment.
I think the point is that they weren't previously unemployed. In rural areas housing is vastly more affordable than urban or city areas. In my home town in West Virginia there are multiple homes and mobile homes with land in fair condition for < $100k.
Because the unemployment % number isn't calculated in a way that represents the real-world unemployment situation.
it's really too early to know
I find myself wondering if we could see the opposite flight too. If you've been completely alone in your countryside manor for the last four months, might you start thinking fondly of living in closer quarters with others?
I find myself wondering if we could see the opposite flight too. If you've been completely alone in your countryside manor for the last four months, might you start thinking fondly of living in closer quarters with others?
WSJ has been writing about this a while during COVID[0]. Their take seems to be that people don't want to move, so they aren't putting their houses up for sale. This means decreased supply of existing houses. So reduced supply plus really low interest rates have led to increasing housing prices. This probably helps motivate builders to get more houses built.
Then you have the added fact that COVID has made your home the place where you spend all your time. As I've seen my California co-workers joke about, they spent a bunch of money on an apartment right near work so their commute would be short, but it's a tiny apartment. This is now biting them, which is why lots of people are going elsewhere during this time. It's also leading to rent prices dropping across the country (as those high-price apartments near job/downtown/important spots don't matter as much.
[0] https://www.wsj.com/articles/why-home-prices-are-rising-duri...
Then you have the added fact that COVID has made your home the place where you spend all your time. As I've seen my California co-workers joke about, they spent a bunch of money on an apartment right near work so their commute would be short, but it's a tiny apartment. This is now biting them, which is why lots of people are going elsewhere during this time. It's also leading to rent prices dropping across the country (as those high-price apartments near job/downtown/important spots don't matter as much.
[0] https://www.wsj.com/articles/why-home-prices-are-rising-duri...
Great point.
I've been wondering -- if commute times suddenly become close to irrelevant, because most hours worked are remote, that changes a ton of housing calculations, right?
Remote work is over-represented in tech though, so I don't know how much of the population it will really effect, since we're primarily a services economy.
Not sure what the effect size is, but if I could easily live anywhere it'd probably be more remote.
I've been wondering -- if commute times suddenly become close to irrelevant, because most hours worked are remote, that changes a ton of housing calculations, right?
Remote work is over-represented in tech though, so I don't know how much of the population it will really effect, since we're primarily a services economy.
Not sure what the effect size is, but if I could easily live anywhere it'd probably be more remote.
Sure. There are advantages to being within range of a major city for the occasional day/evening trip or weekend: eating out, airport, theater, health care, etc.
That said, some of those things are less of a big deal for some people than others and stretching the distance to, say, a 2 hour drive increases the area that you could potentially live in enormously if you don't need to worry about a commute. (And for a rare visit to an office, you can just stay at a hotel if you're normally remote.)
Of course, for some, there are advantages to living somewhere that is truly remote.
That said, some of those things are less of a big deal for some people than others and stretching the distance to, say, a 2 hour drive increases the area that you could potentially live in enormously if you don't need to worry about a commute. (And for a rare visit to an office, you can just stay at a hotel if you're normally remote.)
Of course, for some, there are advantages to living somewhere that is truly remote.
If there's a silver lining to this pandemic, it will be an end to the 20+ year trend of "you have to be in one of 10 cities to have a real career."
This is terrible for the majority of the country. It leads to brain drain and IMHO is a major force in political hyper-polarization.
It's also terrible for those 10 cities, as it leads to real estate hyperinflation in those areas that makes housing unaffordable. People who aren't "white collar" can barely afford to live at all, and even people who make comfortable six figure salaries must strain to get into housing and it negatively impacts their ability to build wealth.
In short it leads to: no jobs, unaffordable housing, pick one.
The reversal of this trend would be a win/win for everyone.
I've also seen the negative aspects of "new urbanism." To those who don't see it yet, I'll leave this here:
https://en.wikipedia.org/wiki/Law_of_rent
In short: urbanism tends to enrich present day property owners and can worsen wealth distribution. If people can't own property they are at the mercy of the law of rent and are shut out of the primary mechanism for middle class wealth accumulation.
As far as the environment goes, 20 years ago we did not have affordable high performing good range EVs on the market. Now we do. The suburbs could be fully electrified, and suburban roofs are good enough to supply a minimum of 50% of the power required (and often more) for a typical suburban home.
Land use is IMHO only a concern in very dense countries and regions. The USA could experience a quadrupling of the size of its suburbs and still only a small percentage of land would be used for this. The vast majority of land (and water etc.) use is farming, and urban/suburban settlement patterns have no effect at all on how much farm land is needed. If anything urbanism may slightly increase farm land requirements as it encourages people to eat at restaurants rather than cook food at home. The restaurant system is incredibly wasteful of food, while eating at home tends to encourage less food waste.
This is terrible for the majority of the country. It leads to brain drain and IMHO is a major force in political hyper-polarization.
It's also terrible for those 10 cities, as it leads to real estate hyperinflation in those areas that makes housing unaffordable. People who aren't "white collar" can barely afford to live at all, and even people who make comfortable six figure salaries must strain to get into housing and it negatively impacts their ability to build wealth.
In short it leads to: no jobs, unaffordable housing, pick one.
The reversal of this trend would be a win/win for everyone.
I've also seen the negative aspects of "new urbanism." To those who don't see it yet, I'll leave this here:
https://en.wikipedia.org/wiki/Law_of_rent
In short: urbanism tends to enrich present day property owners and can worsen wealth distribution. If people can't own property they are at the mercy of the law of rent and are shut out of the primary mechanism for middle class wealth accumulation.
As far as the environment goes, 20 years ago we did not have affordable high performing good range EVs on the market. Now we do. The suburbs could be fully electrified, and suburban roofs are good enough to supply a minimum of 50% of the power required (and often more) for a typical suburban home.
Land use is IMHO only a concern in very dense countries and regions. The USA could experience a quadrupling of the size of its suburbs and still only a small percentage of land would be used for this. The vast majority of land (and water etc.) use is farming, and urban/suburban settlement patterns have no effect at all on how much farm land is needed. If anything urbanism may slightly increase farm land requirements as it encourages people to eat at restaurants rather than cook food at home. The restaurant system is incredibly wasteful of food, while eating at home tends to encourage less food waste.
Living density doesn’t really matter. The virus spreads in indoor common areas like supermarkets, bars, restaurants, etc. These are just as dense in rural areas, maybe more due to lack of delivery.
People are not moving because they think it's safer. They leave because it's easier to live, especially with family, in a single family house on a large lot when everyone is stuck at home. What's the point living in a small space in the city (and paying a lot of money for it) when you work from home and can't even sit at a cafe. For me the commute was always the biggest reason to stay near the city.
In my experience, people in lower density areas leave thier house less than people in major urban centers. Additionally, the densities aren't the same even indoors. Again ancedotally, but the average number of people packed into a cheap restaurant in the city versus the deep suburbs or smaller town averages way less.
However, due to how Covid works, a grocery store that serves 1000 rural people is still pretty busy in a given day. The air itself, in the store, is pretty much giving people COVID. I've pretty much been going to the store once a week since this started. I wear nitrile gloves and an n95 mask. I am pretty sure I caught it two weeks ago and my symptoms are just now flaring. I know it's covid because that's pretty much the only thing you're going to catch with all that protection right now. The rural county and city I am in is surging in cases right now, and very few people are wearing masks. I've really questioned my citizenship in the US for the last few months. I don't think it's that I never belonged in the US. I think that people have changed so much that politically they are willing to do harm to others because they don't want to wear a mask. I mean that would not have happened in the 50s - probably everyone would have worn a mask if the government asked them to. Which is ironic because many of the people playing into this masklessness are older. I'm actually quite confused lately about the way people in the world justify the things that they do. Maybe it's just the US?
For whatever it’s worth, anti mask movements were popular during the last global pandemic in 1918, so I don’t think it’s that people have changed. https://untappedcities.com/2020/07/15/the-anti-mask-league-o...
Wow, thanks for that article. I wasn't aware. I guess it's just people then, not exactly related to the current political climate then, really. It's quite amazing how similar the pictures in 1918 look to today w/respect to mask wearing. I'm curious if anti-mask sentiment is more of an American thing or worldwide...
A lot of people simply aren't afraid. There is very little you can do bridge the gap between people who live in fear and those that do not.
To put it starkly, most of the death has been confined to nursing homes and most people don't see it. Most people don't know anyone who has died of COVID. It is not that deadly of a pandemic yet.
Surging cases isn't surging death. There has been a very small uptick in deaths as the virus spreads through the South, but not nearly as big as the surge in cases. Meaning more people are living through it.
It is easy to pretend things are normal and the only thing standing in the way of the unafraid people living normally are the scared people.
The scared people like to talk about all the unknowns. Who knows how many will have lasting damage? Who knows if you can get reinfected?
The not scared people are okay with the uncertainty. Every day you get into your car you could die in a car accident, you don't get torn up about the unknowns.
I've said this from the beginning, if this disease killed more people of prime age, the response would be very different.
But it is very hard to scare the confident, unafraid people into submission the way the virus spreads and kills right now.
To put it starkly, most of the death has been confined to nursing homes and most people don't see it. Most people don't know anyone who has died of COVID. It is not that deadly of a pandemic yet.
Surging cases isn't surging death. There has been a very small uptick in deaths as the virus spreads through the South, but not nearly as big as the surge in cases. Meaning more people are living through it.
It is easy to pretend things are normal and the only thing standing in the way of the unafraid people living normally are the scared people.
The scared people like to talk about all the unknowns. Who knows how many will have lasting damage? Who knows if you can get reinfected?
The not scared people are okay with the uncertainty. Every day you get into your car you could die in a car accident, you don't get torn up about the unknowns.
I've said this from the beginning, if this disease killed more people of prime age, the response would be very different.
But it is very hard to scare the confident, unafraid people into submission the way the virus spreads and kills right now.
maybe, but if you can't go out (at least not very much) having separate rooms for everyone to go to, space for hobbies, and perhaps a yard to stretch out in becomes very valuable.
Also, in suburban and rural areas, private car transportation is much more common where in the city cars are an expensive luxury, so in cities your transportation is an added virus transmission risk. The NYC subway was a huge factor in the virus explosion there, for example.
Also, in suburban and rural areas, private car transportation is much more common where in the city cars are an expensive luxury, so in cities your transportation is an added virus transmission risk. The NYC subway was a huge factor in the virus explosion there, for example.
[NBER Working Paper No. 27021] The Subways Seeded the Massive Coronavirus Epidemic in New York City https://www.nber.org/papers/w27021.pdf
In Germany at least there is a correlation between density and cases per capita. How is it in the US?
Yes, there is a correlation, but it is much more nuanced than that (which is probably true in Germany as well).
Take a look at the dashboard where I live:
https://www.chicago.gov/city/en/sites/covid-19/home/covid-da...
On the left-hand side, switch to the "Weekly by Zip" view and on the right-hand side a map of the city will show up. The really dense parts of the city are along the eastern edge, from the middle and going north. This is where all the high-rise buildings are.
If you look at the western part of the city, from the middle and going south, this is pretty low density.
The main difference is dense parts of the city do not have crowded living spaces, while the less dense parts have a lot of overcrowding.
Take a look at the dashboard where I live:
https://www.chicago.gov/city/en/sites/covid-19/home/covid-da...
On the left-hand side, switch to the "Weekly by Zip" view and on the right-hand side a map of the city will show up. The really dense parts of the city are along the eastern edge, from the middle and going north. This is where all the high-rise buildings are.
If you look at the western part of the city, from the middle and going south, this is pretty low density.
The main difference is dense parts of the city do not have crowded living spaces, while the less dense parts have a lot of overcrowding.
Less urban areas have "less to lose" in value from closures than more urbanizd ones. If they have less to no ammenitity proximity as a source of value. Put simply you weren't living in the country for the broadway theater. That changes some relative values even ignoring the physical distance from work losing relevance.
Pre-covid, subways were way more packed than supermarkets, restaurants, and even pretty packed bars. Covid made Manhattan much less livable.
folks are erroneously using density as a proxy for the primary transmission vector, which is prolonged, varied, and direct exposure to others' respiratory exhaust (understandable, but still erroneous). that happens primarily face-to-face, in close proximity, for many continuous minutes, not walking around a grocery store or sitting in a restaurant.
bars/clubs are different because they're primarily spaces for guard-lowering behaviors (drinking, dancing, etc.), which also lowers risk mitigation practices against infection.
this misperception of risk is what leads us to poorly placed faith in lockdowns, rather than the more sensible "distance, and when you can't mask" rule that has (nearly) all the benefits and (nearly) none of the massive downsides.
bars/clubs are different because they're primarily spaces for guard-lowering behaviors (drinking, dancing, etc.), which also lowers risk mitigation practices against infection.
this misperception of risk is what leads us to poorly placed faith in lockdowns, rather than the more sensible "distance, and when you can't mask" rule that has (nearly) all the benefits and (nearly) none of the massive downsides.
https://ourworldindata.org/grapher/covid-19-death-rate-vs-po...
You are right. Population density appears to not really matter. Mask wearing and distancing appear to matter much much more.
thanks for the data support. it's really about getting people to take sensible precautions (by making them easy and reasonable), not going overboard and inducing a backlash due to disregarding relevant issues and consequences.
Lockdowns is how you get people to stop meeting face-to-face in close proximity. Many simply won't otherwise.
Is this propaganda to help relax the home owning population?
If the jobless rate and GDP continue to suffer I can’t see this being anything but bad for rural and suburban real estate.
If the jobless rate and GDP continue to suffer I can’t see this being anything but bad for rural and suburban real estate.
We’ve had riots, inaction by mayors, and ridiculous decisions by leaders in large metro areas for the past month. Nobody in their right mind is staying in cities, especially after the insane selective application of laws and ordinances the last 5-6 weeks.
Who would buy a nice place in, for example, St. Louis right now?!
Who would buy a nice place in, for example, St. Louis right now?!
>We’ve had riots
>Who would buy a nice place in, oh, for example St. Louis, right now?!
People who want to live there regardless and see an opportunity to spend less money doing so. They're the same people who buy real-estate on the cheap after it's value has been depressed by a "fresh in people's minds" disaster in any other location.
Live in a city. Deal with city problems. If you want to live in Nebraska don't be surprised if a tornado flattens your property. If you want to live in Florida don't be surprised if it's underwater. Having rioters burn your home to the ground is simply the mode of destruction you accept some risk of by living in a city.
Personally I'd rather deal with nature trying to destroy my stuff rather than people trying to destroy my stuff but I can understand why people want to live in the city.
>Who would buy a nice place in, oh, for example St. Louis, right now?!
People who want to live there regardless and see an opportunity to spend less money doing so. They're the same people who buy real-estate on the cheap after it's value has been depressed by a "fresh in people's minds" disaster in any other location.
Live in a city. Deal with city problems. If you want to live in Nebraska don't be surprised if a tornado flattens your property. If you want to live in Florida don't be surprised if it's underwater. Having rioters burn your home to the ground is simply the mode of destruction you accept some risk of by living in a city.
Personally I'd rather deal with nature trying to destroy my stuff rather than people trying to destroy my stuff but I can understand why people want to live in the city.
> live in Nebraska don't be surprised if a tornado flattens your property
For what it's worth, the average person in Tornado alley will live their entire life without ever seeing an actual tornado, much less get flattened by one.
For what it's worth, the average person in Tornado alley will live their entire life without ever seeing an actual tornado, much less get flattened by one.
For what it’s worth I’ve lived in downtown areas for the last 10 years and I’ve never seen rioters burn down anyone’s house or shop. I’ve never even seen a single rioter (I have seen many peaceful protests though).
I lived in Dallas for 14 years. The only time I have ever seen a tornado live is when I was growing up in South Florida.
We shouldn't legitimize the mindset the parent is pushing, that riots have swept the nation.
Protests swept the nation. Many cities had increased vandalism. A small number had anything approaching riots.
I am renting a house very near the city center. Were it not for the home prices, I would love to own here... though another poster made a good point. All the good reasons to live in the city (night life, people watching, proximity to friends and services and hobbies) are closed down. At least I can walk to the grocery store.
Protests swept the nation. Many cities had increased vandalism. A small number had anything approaching riots.
I am renting a house very near the city center. Were it not for the home prices, I would love to own here... though another poster made a good point. All the good reasons to live in the city (night life, people watching, proximity to friends and services and hobbies) are closed down. At least I can walk to the grocery store.
> Many cities had increased vandalism
You say that like it's a past event. Portland is still seeing riot activity. They have done a fair amount of damage downtown. I feel sad for the peaceful BLM protestors because much of the general public will not draw a distinction, so this kind of behavior will blunt their message.
You say that like it's a past event. Portland is still seeing riot activity. They have done a fair amount of damage downtown. I feel sad for the peaceful BLM protestors because much of the general public will not draw a distinction, so this kind of behavior will blunt their message.
You're misinterpreting my comment. Riots haven't swept the nation any more than a hurricane moving up the gulf coast "sweeps the nation". It's just that's the form of disaster that tends to strike cities and I don't think people should be acting like it's unexpected.
> legitimize the mindset the parent is pushing
Is this phrase the same as "I disagree with the parent"?
Is this phrase the same as "I disagree with the parent"?
Yeah, I don't think there are any issues with people moving to cities if they want to live there.
Just because there are protests, etc. going on doesn't mean the entire city is on fire...
Just because there are protests, etc. going on doesn't mean the entire city is on fire...
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Unlike tornadoes, something can be done to avoid riots burning people houses.
Most riots seem to be sparked by counter-protestors (the police). They could do with more training in de-escalation instead of the "warrior" training too many of them get.
Behind the Bastards did an episode on it.
https://www.iheart.com/podcast/105-behind-the-bastards-29236...
Behind the Bastards did an episode on it.
https://www.iheart.com/podcast/105-behind-the-bastards-29236...
Where did rioters burn homes?
That was a building under construction, it wasn’t anybody’s home.
> Live in a city. Deal with city problems. [...] If you want to live in Florida don't be surprised if it's underwater.
Are you suggesting Florida has no cities?
Are you suggesting Florida has no cities?
I think that's wishful thinking, St Louis was declining way before covid. I don't see a stop of migration happening anytime here in the Austin metro or any of the other major Texas cities. We may see it in HCOL places but I wouldn't count on people leaving Denver, Portland, the NC Triangle, and the similar 'B cities'
> St Louis was declining way before covid
850,000 residents in 1950 and 300,000 now. You are right, Covid had nothing to do with it.
850,000 residents in 1950 and 300,000 now. You are right, Covid had nothing to do with it.
> We’ve had riots, inaction by mayors, and ridiculous decisions by leaders in large metro areas for the past month.
Another factor that is (unexpectedly) making my family reconsider intown living is the school closure decisionmaking. If this turns out to be a 1 or 2 year ordeal, and urban school systems end up going full virtual for that time while (some) rural school systems are still fully face-to-face, then that becomes a huge factor for us.
Another factor that is (unexpectedly) making my family reconsider intown living is the school closure decisionmaking. If this turns out to be a 1 or 2 year ordeal, and urban school systems end up going full virtual for that time while (some) rural school systems are still fully face-to-face, then that becomes a huge factor for us.
In Seattle it is really difficult to find decent houses to buy right now, buyers are panicking and prices have increased significantly in the last couple of months.
My guess is that hot areas are getting hotter and colder areas are getting colder, but COVID hasn’t changed that trend yet.
My guess is that hot areas are getting hotter and colder areas are getting colder, but COVID hasn’t changed that trend yet.
tbh I feel really bad for anyone that buys during this panic phase. We are almost certainly headed for the largest recession in US history, and I don't see a future where housing prices don't crash as a result.
(I'm also in Seattle and waiting for that to happen before I buy)
(I'm also in Seattle and waiting for that to happen before I buy)
True I had the same concerns, but super low interest rates distort the picture. Also, while buying now is risky, you are likely to only lose one or two hundred K of value in a recession at most, and that will pop back over time, so long term buyers should be OK.
Paid way too much recently for a townhouse in Ballard, but at the end of the day it seems like a pretty sound decision (we aren't buying for investing, but for living).
Paid way too much recently for a townhouse in Ballard, but at the end of the day it seems like a pretty sound decision (we aren't buying for investing, but for living).
> If the jobless rate and GDP continue to suffer I can’t see this being anything but bad for rural and suburban real estate.
Why do you think it would impact rural and suburban properties specifically? It seems like a bad economy would depress city property values as well.
Why do you think it would impact rural and suburban properties specifically? It seems like a bad economy would depress city property values as well.
i would suspect as much. Home prices have been, as they cyclically trend to do, wildly inflated and overheated for quite some time now. Most homes command a minimum of 250k no matter where you look, with many of them existing as mere flophouses converted for a few thousand dollars with the cheapest lumber yard fixtures in an offensive attempt to cash in on the puerile american practice of "flipping" properties.
The market is sorely overdue for a massive "correction" to respect the near 40% unemployment in the US, widespread rioting, and crippling pandemic. Id put the counter at six months, but so far everything has defied the yield curve inversion and continued to run like a race car on nitrous. sooner or later somethings got to give.
The market is sorely overdue for a massive "correction" to respect the near 40% unemployment in the US, widespread rioting, and crippling pandemic. Id put the counter at six months, but so far everything has defied the yield curve inversion and continued to run like a race car on nitrous. sooner or later somethings got to give.
I 100% agree with this. We built our home in 2009 for an even $100,000. I live 40 minutes from the nearest 'urban' center, and probably 20 minutes from the closest 'town' (less than 600 people). Now, granted, we put a massive amount of sweat equity into this home, but
It's current appraisal sits at $275,000.
That is just unbelievable. It's not realistic. It's completely removed from any sort of reality. I mean, we have a nice house, don't get me wrong, but it's not worth over a quarter of a million dollars.
And that is every house within 20 miles of me. In the last two years our values have skyrocketed, and nobody knows why.
It's current appraisal sits at $275,000.
That is just unbelievable. It's not realistic. It's completely removed from any sort of reality. I mean, we have a nice house, don't get me wrong, but it's not worth over a quarter of a million dollars.
And that is every house within 20 miles of me. In the last two years our values have skyrocketed, and nobody knows why.
If someone actually paid $275k for your home, then it definitely is worth $275k. But right now that value is just theoretical (maybe real for purposes of taxation, but that doesn't always reflect what a buyer will pay). The moment money changes hands, it becomes real.
Part of the problem is that a quarter of a million dollars isn't worth a quarter of a million dollars any more. c.f inflation
> it's not worth over a quarter of a million dollars
What is worth a quarter million? How do you assess the value of your home?
What is worth a quarter million? How do you assess the value of your home?
The home was assessed at over a quarter of a million dollars, for both taxes this year, and by an independent assessor when we refinanced.
I'm saying I have a decent home, but that amount of money is unrealistic. It cost $100,000 to build, 11 years ago. I cannot be convinced it almost tripled in value, in any realistic market, in 11 years.
I'm saying I have a decent home, but that amount of money is unrealistic. It cost $100,000 to build, 11 years ago. I cannot be convinced it almost tripled in value, in any realistic market, in 11 years.
I don't think you are thinking about this correctly. Have you considered the impact of compound interest? You say it cost you $100,000 plus "a massive amount of sweat equity" . I don't know what you consider massive, but let's guess at $50,000 worth. That is, if you were paying market rates at the time to professionals, how much would they have charged, plus the cost of hiring them, plus the taxes you would have paid to have the money to pay them, etc?
Anyway, if we start with an actual "cost" of $150,000, you get to $250,000 with 11 years of compound interest at 5%. If we instead completely ignore your labor input, 11 years at 9% gets us from $100,000 to $250,000. Can you really not be convinced that "realistic market" might not have a 5% (or 9%) yearly increase in value? That's not to say it will always go up that much, but it doesn't seem unrealistic that it might.
The bigger question of course is how we determine "value". Is $250,000 for a house today any more "realistic" than $100,000 to build it 11 years ago? Not by any objective measure. They are both just numbers, determined by how much people are willing to pay, which in turn depends on how much they have in their bank accounts, which in turn depends on how much someone is willing to pay them, which (circularly) depends on how much someone else is willing to pay for something else. There's nothing "realistic" about any particular numeric value.
Anyway, if we start with an actual "cost" of $150,000, you get to $250,000 with 11 years of compound interest at 5%. If we instead completely ignore your labor input, 11 years at 9% gets us from $100,000 to $250,000. Can you really not be convinced that "realistic market" might not have a 5% (or 9%) yearly increase in value? That's not to say it will always go up that much, but it doesn't seem unrealistic that it might.
The bigger question of course is how we determine "value". Is $250,000 for a house today any more "realistic" than $100,000 to build it 11 years ago? Not by any objective measure. They are both just numbers, determined by how much people are willing to pay, which in turn depends on how much they have in their bank accounts, which in turn depends on how much someone is willing to pay them, which (circularly) depends on how much someone else is willing to pay for something else. There's nothing "realistic" about any particular numeric value.
Inflation is about 2-3% per year, so that brings the real appreciation down to 2-6%.
That doesn’t tell the whole story, however. The 2008 stimulus plan basically printed money in the form of increased stock valuations and cheap mortgages. Stocks and housing have inflated well over 3% per year since then, while consumer prices have not.
Eventually that has to unwind. One option is for the federal government to claw the money back. That will lead to deflation and immediate economic ruin, so they can’t do it.
The more likely option is that we eventually hit a patch of high consumer price index inflation as workers start charging a living (housed) wage for their time.
That doesn’t tell the whole story, however. The 2008 stimulus plan basically printed money in the form of increased stock valuations and cheap mortgages. Stocks and housing have inflated well over 3% per year since then, while consumer prices have not.
Eventually that has to unwind. One option is for the federal government to claw the money back. That will lead to deflation and immediate economic ruin, so they can’t do it.
The more likely option is that we eventually hit a patch of high consumer price index inflation as workers start charging a living (housed) wage for their time.
> Stocks and housing have inflated well over 3% per year since then, while consumer prices have not.
Pretty much only the west coast has seen inflating home prices. For the rest of the country, inflation adjusted price per square foot hasn't really changed [0]. And Inflation adjusted Annualized S&P 500 Returns with Dividends Reinvested for the past 15 years are 6.738% versus 7.690% for the 15 years before that [1].
0]: https://www.supermoney.com/inflation-adjusted-home-prices/
[1]: https://dqydj.com/sp-500-return-calculator/
Pretty much only the west coast has seen inflating home prices. For the rest of the country, inflation adjusted price per square foot hasn't really changed [0]. And Inflation adjusted Annualized S&P 500 Returns with Dividends Reinvested for the past 15 years are 6.738% versus 7.690% for the 15 years before that [1].
0]: https://www.supermoney.com/inflation-adjusted-home-prices/
[1]: https://dqydj.com/sp-500-return-calculator/
It doesn't really matter what it cost to build or how much time elapsed.
Try to sell it, see what kind of offer(s) you get--that's exactly to the penny what the home's value is.
Try to sell it, see what kind of offer(s) you get--that's exactly to the penny what the home's value is.
I just sold my home for just about 3x what I paid for it in 2009 (used house though)
[shrug]
Between 1998 and 2003 my house in Minneapolis doubled in value. A year later (after I sold) it had gone up by 50%.
Tripling in value after 11 years, when you bought at the bottom of the market doesn't seem surprising at all.
Tripling in value after 11 years, when you bought at the bottom of the market doesn't seem surprising at all.
What’s the value of the land and the sweat equity? You may have paid $100k and time but the buyer is paying all in currency for the finished product.
2009 was near the bottom of the housing crisis in the US. You picked a really good time to build. While housing prices are likely overheated, it’s not where we were in 2007, at least adjusted for inflation.
Prices are high because of stupid low interest rates, an economy that had been strong till March, and probably a few demographic trends (echo boomers finally having kids).
When we pay the piper for this crisis I think we’ll see prices drop, but not at 2008 levels
Prices are high because of stupid low interest rates, an economy that had been strong till March, and probably a few demographic trends (echo boomers finally having kids).
When we pay the piper for this crisis I think we’ll see prices drop, but not at 2008 levels
Time to sell? Rent for a year or two?
I sure hope so, right now the median home price is 4.5x the median income. If that continues to increase, we’ll be creating a generation of renters captured by whoever had the ability to borrow money to purchase the inflated assets.
4.5x sounds unbelievably amazing. In my home city it's around 16x.
16x is extreme. Silicon Valley is a bit under 10x.
Vancouver, Canada has sky-high home prices but is missing the high-paying jobs of the Valley. Rent isn't too bad though, so quality of life can be pretty good.
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Anecdotally this is happening. Lumber at Home Depot is scarce. I know people leaving Bay Area, Philly, and Richmond. In the case of Richmond, the protests contributed. I get the sense that many of the families leaving were planning to leave eventually in the next few years anyway. In America, it is very common for couples to start in cities, and then move out before child 1 goes to school. This situation is accelerating that process.
" Lumber at Home Depot is scarce."
I suspect that's more ... home projects with folks stuck at home / out of work.
I suspect that's more ... home projects with folks stuck at home / out of work.
Are people really leaving Richmond over protests? I understand maybe those up along Monument Avenue feeling a little unsafe but things have noticeably died down.
The city is already (what I see) fairly priced compared to others. You might not be able to land that nice Monument Avenue mansion for cheap, but all of the surrounding neighborhoods have stuff going for ~$300K.
The city is already (what I see) fairly priced compared to others. You might not be able to land that nice Monument Avenue mansion for cheap, but all of the surrounding neighborhoods have stuff going for ~$300K.
Things are different all over I guess. Our lumber stores are well-stocked where I live in the Midwest.
Also the Asian market had flour in piles of huge bags, when folks were making a run on the regular store. So I have flour with Asian writing on the bag.
They sell masks at store entrances now for 50 cents. No shortages to speak of. Eggs just went on sale $0.69 a dozen extra large.
Also the Asian market had flour in piles of huge bags, when folks were making a run on the regular store. So I have flour with Asian writing on the bag.
They sell masks at store entrances now for 50 cents. No shortages to speak of. Eggs just went on sale $0.69 a dozen extra large.
In my small group of friends this has been the case. They were already looking at moving out of condo or apartment and into a home. COVID may have sped that up.
At the same time I'm 4 months into quarantine and I'm looking forward to going back to the office. Working from home is a nice option, but a mandatory requirement is not the same.
At the same time I'm 4 months into quarantine and I'm looking forward to going back to the office. Working from home is a nice option, but a mandatory requirement is not the same.
I doubt the people who build homes buy their wood at Home Depot. That would be needlessly expensive for someone who can justify buying it in bulk. Home Depot is where you go for a little wood to patch up your porch or build a shed.
Uncertainly isn't doing the supply chain any good either, so I wouldn't assume that demand is the only contributor to scarce lumbar at retail.
30% of Americans missed their housing payments in June. [1]
Why the hell would you build a new house, when an unprecedented, enormous number of homes are in danger of foreclosure?
[1] https://www.cnbc.com/2020/06/16/30percent-of-americans-misse...
Why the hell would you build a new house, when an unprecedented, enormous number of homes are in danger of foreclosure?
[1] https://www.cnbc.com/2020/06/16/30percent-of-americans-misse...
Geography would be my guess. The places people are building are likely not the places that people are missing payments.
Your question/comment is very confusing.
The people buying houses are not the same as the ones who missed their payments.
The people building houses are not connected with those who are missing payments.
The people buying houses are not the same as the ones who missed their payments.
The people building houses are not connected with those who are missing payments.
Your response is also very confusing.
Foreclosed homes usually go on the market for a steep discount. Additionally widespread foreclosures would depress house pricing in general. The market will gradually price in reduced rent-seeking ability.
For a buyer, it may be a good option to wait a relatively short period for prices to depress rather than build a new home at this time.
Edit: Mentioned reduced landlord rent-seeking ability in response to @sombremesa’s question if rental properties would affect pricing.
Foreclosed homes usually go on the market for a steep discount. Additionally widespread foreclosures would depress house pricing in general. The market will gradually price in reduced rent-seeking ability.
For a buyer, it may be a good option to wait a relatively short period for prices to depress rather than build a new home at this time.
Edit: Mentioned reduced landlord rent-seeking ability in response to @sombremesa’s question if rental properties would affect pricing.
> Foreclosed homes usually go on the market for a steep discount.
This may be market dependent. When I was buying a house, foreclosed homes were usually not any cheaper.
> For a buyer, it may be a good option to wait a relatively short period for prices to depress rather than build a new home at this time.
I think the general gist is that suburban houses are in demand now, and prices are not dropping. Some may hope that they will drop in the future for reasons you are pointing out, but it's a gamble that depends on the timeline of building a house and how long coronavirus is around vs how long it will take for prices to come down.
This may be market dependent. When I was buying a house, foreclosed homes were usually not any cheaper.
> For a buyer, it may be a good option to wait a relatively short period for prices to depress rather than build a new home at this time.
I think the general gist is that suburban houses are in demand now, and prices are not dropping. Some may hope that they will drop in the future for reasons you are pointing out, but it's a gamble that depends on the timeline of building a house and how long coronavirus is around vs how long it will take for prices to come down.
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There is class A,B and C real estate. My guess is that demand surges for class A due to solvent buyers and low interest rates, while payments are missed in B and C.
Average percentages usually don't paint an accurate picture.
Average percentages usually don't paint an accurate picture.
Jokes on us.. My rural area has had a covid spike b/c people refuse to wear masks or social distance.
This is wrong in two major aspects: 1) The current real estate surge isn't related to coronavirus itself, it's related to pent up demand caused by coronavirus lockdowns. 2) People aren't moving to suburbs because they're afraid of corona within major cities, it's because millennials are over their inner city lifestyles while at the same time don't feel safe walking down the street. Survival instincts are kicking in.
I live in a rural area on 3 acres, 1 hour north of SF. Last year, a couple, mid 30s, from the city, bought a house on our street to live out the "Country Dream". Their new country house was back on the market within 12 months. Many people who have never lived in a rural setting don't realize the work load that comes along with country living. Wells, septic systems, tree work and mowing, maintaining defensible space for wildfires, even the work prepping a garden... it takes a lot more time and sweat than many realize.
Anectdote: Since covid started, we refinanced after the federal government started juicing the mortgage market with more funds, and enjoyed a stock windfall.
On top of that, the multi—unit projects got paused, so subcontractors that wouldn’t talk to us in February are now giving us competitive bids.
Some of the stock is going into improvements that we would have done as remodels a decade from now.
Assuming we’re typical, the increase in starts on new construction is probably just a blip as the construction industry catches up with pent up demand.
I’m hoping (for the people building our house, and for out long term sanity) that it’s the beginning of a trend where commutes become less frequent, which increase the feasible maximum radius of cities increases. I could see it going either way.
On top of that, the multi—unit projects got paused, so subcontractors that wouldn’t talk to us in February are now giving us competitive bids.
Some of the stock is going into improvements that we would have done as remodels a decade from now.
Assuming we’re typical, the increase in starts on new construction is probably just a blip as the construction industry catches up with pent up demand.
I’m hoping (for the people building our house, and for out long term sanity) that it’s the beginning of a trend where commutes become less frequent, which increase the feasible maximum radius of cities increases. I could see it going either way.
If you are a white collar professional, especially one with kids, your costs have likely fallen dramatically while your income has probably remained the same.
The personal finance subreddit for Canada is full of anecdotes from middle class professionals who have saved a ton of money during the pandemic on everything from daycare to lunch to housekeeping and are redeploying that money to housing.
The personal finance subreddit for Canada is full of anecdotes from middle class professionals who have saved a ton of money during the pandemic on everything from daycare to lunch to housekeeping and are redeploying that money to housing.
I called this a few months ago. I just today moved into a new house on five acres in the country, and my old house in the suburbs is now worth about 50k more than in January (going by comps).
The people with jobs that let them afford houses weren't laid off, they're working remotely. The people who were laid off were food service / retail who didn't buy houses anyway.
The people with jobs that let them afford houses weren't laid off, they're working remotely. The people who were laid off were food service / retail who didn't buy houses anyway.
Another factor is the current investment environment. Bonds and CDs have very low yields, equities are too risky to fully depend on in many cases, there's fear of inflation. People may instead be parking money in assets such as real estate. Then when the economy (hopefully) recovers in 2-3 years they'll have new cash flow.
I own a house in a tech hub. Because of the smaller inventory in the market it's propping up home prices in my neighborhood which otherwise should be decreasing slightly (trying not to doxx myself here)
My job will be wfh for the rest of the year.
I am considering selling my house to rent a smaller apartment further out of the city center, though still within commuting distance (albeit long commute).
Rent prices are falling, apparently, so my idea would be to rent and save money for a year or two before buying a house again once life comes back to normal.
Am I way off base with this thinking?
Closing costs on selling then buying again later may outweigh benefits of renting although I'm sceptical of that.
I estimate I can lower my housing payment buy $1200mo by renting instead of my mortgage.
My job will be wfh for the rest of the year.
I am considering selling my house to rent a smaller apartment further out of the city center, though still within commuting distance (albeit long commute).
Rent prices are falling, apparently, so my idea would be to rent and save money for a year or two before buying a house again once life comes back to normal.
Am I way off base with this thinking?
Closing costs on selling then buying again later may outweigh benefits of renting although I'm sceptical of that.
I estimate I can lower my housing payment buy $1200mo by renting instead of my mortgage.
How much can you save by refinancing? It sounds like you don’t want this house for much longer. 5/1 ARMs are 2.7%, and the rate is fixed for 5 years. Think of it as renting for 5 years, and it seems less scary.
Of course if the house goes way down in value, and interest rates go up, you end up losing a bunch of equity. However, the house you buy next will probably be discounted too, so the real risk is that you’ll get stuck with a higher rate on the next loan.
Your rental plan is also risky: if prices skyrocket while you rent, you lose out on a lot of appreciated equity, and you still have the interest rate risk when you buy again.
Edit: With the rental plan, you can throw all the equity into a roboadvisor or something. Those have 5-7% real returns in “normal” years, but this isn’t a normal year. (Though your equity in the house is effectively leveraged because of your mortgage. If you own 50% of the house, it only has to appreciate 2.5-3.5% (after inflation) to beat the stocks.
Of course if the house goes way down in value, and interest rates go up, you end up losing a bunch of equity. However, the house you buy next will probably be discounted too, so the real risk is that you’ll get stuck with a higher rate on the next loan.
Your rental plan is also risky: if prices skyrocket while you rent, you lose out on a lot of appreciated equity, and you still have the interest rate risk when you buy again.
Edit: With the rental plan, you can throw all the equity into a roboadvisor or something. Those have 5-7% real returns in “normal” years, but this isn’t a normal year. (Though your equity in the house is effectively leveraged because of your mortgage. If you own 50% of the house, it only has to appreciate 2.5-3.5% (after inflation) to beat the stocks.
I need to run the numbers on refi. I'm on 3.25% fixed rate now and owe ~500k still, definitely not close to 50% paid off either.
Arm loans scare me only because of seeing what happened during the last housing collapse.
Looks like I have a lot of research to do on this but you all have given me some good starting poits to think about thanks!
Arm loans scare me only because of seeing what happened during the last housing collapse.
Looks like I have a lot of research to do on this but you all have given me some good starting poits to think about thanks!
I think that the income tax on your home's realized equity can screw this plan up. Normally when you sell one house and buy another, the equity gets rolled through untaxed through an exemption. I forget the specifics, maybe it's a 1031 exchange?
A 1031 exchange is only relevant to depreciated investment property subject to capital gains at sale. By engaging in a 'like-kind exchange', the basis of the new property is adjusted and it avoids being taxed on the sale price vs. the depreciated value.
There is a standard exclusion of $250K (filing single) for a property used as a personal residence. https://www.irs.gov/taxtopics/tc701
There is a standard exclusion of $250K (filing single) for a property used as a personal residence. https://www.irs.gov/taxtopics/tc701
Transaction costs--both financial and effort. For most people, moving is a lot of work as well as a direct cost. You're also trading a known entity for an uncertain future. Of course, if you want to move out of your current house anyway, that's a different story.
I'm sorry, but if you take financial advice from HN you will end up poor. Actually, I'm not sorry because you are soliciting financial advice from HN which I would treat as a red flag in my life akin to waking up naked in a field covered in blood but without any personal injuries.
Cool cool, why are you here then?
I've been trying to get a mortgage to buy some land near Redding, CA. No one wants to lend on land without buildings.
FWIW, here's the details:
It's forty-four acres, eight miles from Redding, and there was a house there but it burned down in the Carr Fire two years ago. There's a well, septic system, electric hookup, and concrete pad to build on already. You just have to design your dream home and build it. Before the fire burned the house down the property was appraised at $350K and now it's available for $80K.
It seems like a no-brainer to me but I'll be damned if I can find anybody who's interested. Even the sketchy lenders aren't interested.
FWIW, here's the details:
It's forty-four acres, eight miles from Redding, and there was a house there but it burned down in the Carr Fire two years ago. There's a well, septic system, electric hookup, and concrete pad to build on already. You just have to design your dream home and build it. Before the fire burned the house down the property was appraised at $350K and now it's available for $80K.
It seems like a no-brainer to me but I'll be damned if I can find anybody who's interested. Even the sketchy lenders aren't interested.
you need a bridge loan and then a property development loan, not a mortgage.
What you want to engage in is property development and these are substantially higher in interest rates (and typically refinanced once everything is built).
Traditional mortgages are secured by the asset value and the repayments are secured by the potential cashflow from the property. If there's no building then it's just the land value.
What you want to engage in is property development and these are substantially higher in interest rates (and typically refinanced once everything is built).
Traditional mortgages are secured by the asset value and the repayments are secured by the potential cashflow from the property. If there's no building then it's just the land value.
Cheers. I didn't know that.
Suburbs are hot now but my prediction is that it's not going to have an effect on house prices in the suburbs long term. No doubt that covid and remote work make the suburbs more attractive for many. But remote work also means people can spread out more and fewer people moving in to areas with opportunities from other cities/states, which means demand in many hot places will slow down.
My point is, if you look at any major and expensive area, most of the expensive suburb residents are people who moved to the area because of work. Without those people moving in, prices wouldn't have been expensive to beging with.
My point is, if you look at any major and expensive area, most of the expensive suburb residents are people who moved to the area because of work. Without those people moving in, prices wouldn't have been expensive to beging with.
I suppose it is all relative and that it is good starts did not tank more. I do wonder though how many of these starts are builder spec vs pre-existing contracts with large deposits?
Longer term chart of housing starts show just how depressed that market has been when compared to the 70s-early 2000s.
https://www.calculatedriskblog.com/2020/07/housing-starts-in...
Longer term chart of housing starts show just how depressed that market has been when compared to the 70s-early 2000s.
https://www.calculatedriskblog.com/2020/07/housing-starts-in...
I’m building a house with toll brothers in the mountain west right now. As others note - this manifests in individual lots having construction started on them. I can absolutely tell you that they are seeing a influx of engineers from California right now. ThT combined with very limited inventory is resulting in significant price increases (and a removal of incentives) here.
Between remote work becoming much more of A Thing and mortgage interest rates being six feet under, this is not surprising at all.
I share everyone else's concerns about what happens if the economy keeps going on it's downward trend, and foreclosures start to happen again. I'm really hesitant to speculate on that.
I share everyone else's concerns about what happens if the economy keeps going on it's downward trend, and foreclosures start to happen again. I'm really hesitant to speculate on that.
It seems there's almost no barrier to adding the infrastructure required for everyone to live in individual castles, carting themselves around in ever-growing wheelchairs to gigantic commerce centers designed for said wheelchairs (but not humans). Will the cost of this ever come into consideration? Will anything in America be human-sized in 80 years? Perhaps my view is clouded by the Texas sprawl I see every day.
The pickup truck perfectly represents the excesses of this development pattern: It consumes large amounts of fuel and takes up lots of space. With high hoods (and often added bull bar/brush guard) it's dangerous to those outside of it while protecting the single person inside at all costs. It can hold four/five people while also carrying/towing a large amount of purchased goods, and though it isn't often used for such purposes, it represents a "hard work" ethos, especially that of the hourly worker, which fuels the consumerism that enables such a vehicles existence.
The pickup truck perfectly represents the excesses of this development pattern: It consumes large amounts of fuel and takes up lots of space. With high hoods (and often added bull bar/brush guard) it's dangerous to those outside of it while protecting the single person inside at all costs. It can hold four/five people while also carrying/towing a large amount of purchased goods, and though it isn't often used for such purposes, it represents a "hard work" ethos, especially that of the hourly worker, which fuels the consumerism that enables such a vehicles existence.
So.... you're saying there's a bunch of stuff people are doing that you don't like?
My like or dislike isn’t the issue. Let’s just correctly price the externalities.
America is about four weeks away from a massive wave of foreclosures, bigger than 2008.
Does this mean that there are a boatload of jobs that are suddenly okay with working remotely out of state? From my SV engineering circle, none of their companies have updated their policies to allow moving out of state.
I talked recently with an executive at a very large SV company. It was mentioned that people can work remote and live in other areas but the pay is adjusted based on the area they are moving to. I do not know how common this is but I assume it isn't unheard of. (this was pre-pandemic policy BTW)
Demand for bunkers also up. I wonder how peppers are reacting to the pandemic, how many of them are retreating into their safe houses.
If people are really moving out if the cities why are we not seeing a reduction is home prices?
Home prices are inelastic even in normal times. There are large transactions costs, lots of paperwork and intermediaries, and for most people it is their main "investment" so they are loath to sell it at a discount.
Also, the Covid crisis has only been going on for about 6 months and there has been a number of large government interventions to avoid a financial crash. Most mortgage holders can get a deferral on payments simply by asking and if you are unemployed the increased UI benefits have made a big difference in keeping people afloat. I think prices may eventually come down, but this crisis is only in its beginning stage. I think it is simply too early to really tell.
However - even if everything goes awry and there are lots of defaults and a large migration out of cities, we could still end up with steady or rising real estate prices. Why? Because lower interest rates make it easier to service debt and rates are only going down.
I got my mortgage a few years back at what I thought was a killer rate - 4.25%, now I am seeing rates as low as 2.85%. A simple example: The monthly cost of a $100,000 30 year mortgage at 4.25% is $492. The monthly cost of a $125,000 30 year at 2.85% is $517
Because of the change in interest rates I now have 25% more purchasing power at roughly the same monthly price. And that monthly mortgage amount is what really drives payment decisions. The sales price isn't so important - it's can I service the monthly payments, and with lower interest rates you can.
However - even if everything goes awry and there are lots of defaults and a large migration out of cities, we could still end up with steady or rising real estate prices. Why? Because lower interest rates make it easier to service debt and rates are only going down.
I got my mortgage a few years back at what I thought was a killer rate - 4.25%, now I am seeing rates as low as 2.85%. A simple example: The monthly cost of a $100,000 30 year mortgage at 4.25% is $492. The monthly cost of a $125,000 30 year at 2.85% is $517
Because of the change in interest rates I now have 25% more purchasing power at roughly the same monthly price. And that monthly mortgage amount is what really drives payment decisions. The sales price isn't so important - it's can I service the monthly payments, and with lower interest rates you can.
QE infinity? QE tends to lead to asset inflation. Given that the dollar is depreciating, I'd say we are seeing a real reduction in housing costs but not (yet?) a nominal one.
They're moving to suburbs around the cities. So the homes (which aren't in the city) are going up. Rents have been flat in many cities for some time, so they should be coming down.
And why are the in-city homes selling nearly immediately?
Who are all these people that can just uproot themselves and make a “flight to the suburbs” at seemingly the drop of a hat? And then what, in 6 months time they’re going to move back?
Moving for me has always been a big deal. Am I thinking about it the wrong way? Don’t these people have leases or something? Or kids that they’ll have to find a new school for?
Moving for me has always been a big deal. Am I thinking about it the wrong way? Don’t these people have leases or something? Or kids that they’ll have to find a new school for?
I know off the top of my head I think 5 people that decided to buy houses during lockdown. As I heard somewhere early in this, "Crises accelerate life." Largely these are people who were planning to buy / upgrade in the near term anyway.
Suddenly they had time on their hands and it seemed like the right time. Not to mention that interest rates are dropping through the floor.
Suddenly they had time on their hands and it seemed like the right time. Not to mention that interest rates are dropping through the floor.
The only thing that's kept me in the city is the lack of remote work and the difficulty of moving. I came here for the higher salaries, which was key to paying off my absurd college costs. If remote work is easier now, it's a big motivator for me to get out to someplace I can live comfortably for reasonable costs.
What makes you think they want to move back in 6 months? Moving is a big deal, you are right about that. It's not impossible to do in a couple of months if you have the means to put down 20% and get a traditional mortgage.
Cost/benefit analysis. Leaving cities often comes with substantially lower rent.
They are people who were thinking about moving anyway, or people whose situation has changed. Most leases are one-year leases. If you've already been thinking about moving from the city, the fact that 1. much of the city is closed and its benefits have declined, 2. you're now working from home, so short commutes are less important, and 3. many cities haven't seen sufficiently steep rent declines, may make you leave.
Furthermore, no one knows when we're going to get a vaccine. It could be in December. It could be much later than that. Winter in a cold-weather climate in a small, expensive domicile may be very difficult right now.
Furthermore, no one knows when we're going to get a vaccine. It could be in December. It could be much later than that. Winter in a cold-weather climate in a small, expensive domicile may be very difficult right now.
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Just rich old baby boomers retiring. They don't want to live in the cities with young people. so they buy land out in the country to live out there final days.
Please do correct me if I'm wrong. But also; so people are leaving the cities where they appear to have careers/work/friends and are heading to the suburbs during lockdown because of the virus situation, while businesses are laying off and contracting/shrinking/making losses and are going out of business?
I know several people who have moved out of cities over the last several years actually for various reasons, mostly the accumulating cost and declining benefits, especially with the consequences of political and government policies starting to impact communities along with the overall cost of living increases. This is not a coronavirus trend, even if that has only accelerated things.
What this likely is, is an industry PR story to place the thought into people's minds to move to the suburbs to, with slight panic, hope they can find buyers for all the buildings they were committed to build even before this whole situation. It's the same old developer industry super-cycle; push and pull, ebb and flow of urban and suburban development cycles, only exacerbated by poor material and low skill construction meant to last for one cycle.