Where have all the sellers gone?
As I read this New York Times article: Where have all the houses gone? my mind went to Yogi Berra’s line of “it’s deja vu all over again” as I checked my files and discovered that this will be my 5th article with this title – and the first was written in 2013.
Let’s look at the what and the why.
First, the what. This chart shows that inventory has plummeted across the country:
: That is not so easy to summarize but the NYT suggests that half of the decline is pandemic-related and the other half is “more complicated”.
The pandemic impact:
– Supply is down because “Is this a time you want to open your house up to people?”
– Baby boomers have been reluctant to sell and downsize
– Who wants to move into an assisted living facility or nursing home?
– Millions of homes are still in mortgage forbearance schemes – some of these may otherwise have come on to the market
– Rents are falling as single home prices are rising, an unusual pairing
– Homeowners are fleeing cities for the burbs – and for warmth and low taxes
The non-pandemic effect:
– After the crash in home prices in the Great Recession, many single family homes were bought to rent out – in the last decade some 7 million homes have become rental properties
– New home construction dropped sharply after the Great Recession
– Low mortgage rates (even before the pandemic-driven drop below 3%) – have been cheap for some years, encouraging some homeowners to retain their current home as an investment property when they buy a larger one
– When the country is vaccinated and people feel free to move around again will baby boomers resume selling?
– And will this add to demand in areas where their children and grand-children live?
– Is the move to a new lifestyle in a warmer and low tax or tax free environment a short-term reaction to the pandemic or a longer term trend? (I believe it is the latter).
– Will new home construction continue to pick up? Probably, but with the cost of raw materials jumping new home prices will continue to rise.
– Will people feel confident about returning to nursing homes and assisted living facilities; or will they elect to “age in place” with more in-home help?
– Will a new type of development take place, something between living in a single family home and a nursing home?
I used to work with a Realtor who whenever I quoted national or regional statistics would respond “all real estate is local.” I suspect that a lot of Realtors and homeowners and home buyers have felt that the issues they were facing in recent months and years were local. I used to point out to my friend that while real estate was local, it was also important to be aware of national trends that may have an impact on local markets. That is even more true today.
And while home prices have risen sharply in the last 9 months, it is relevant to consider that as we emerge into a post-pandemic world, we expect to see the animal spirits released which, with the help of major economic stimulus from the latest injection of funds and the likelihood of a much needed investment in infrastructure, should see the US poised for several years of rapid economic growth.
While this will likely drive interest rates and hence mortgage rates higher, that will be for the right reasons.
It would be a brave person who would bet against a continuing rise in home prices in the near future.
Sales Associate | Market Analyst | DomainRealty.com
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