z3r0c00l wrote: ↑Sat Jan 15, 2022 2:26 pm
sc173 wrote: ↑Sat Jan 15, 2022 2:19 pm
sperry8 wrote: ↑Sat Jan 15, 2022 2:02 am
Over the next few years, interest rates may move up. This will knock affordability down. Covid may end (or become endemic), which should reduce demand and potentially increase supply.
Why would people stop wanting to purchase homes if COVID ends?
Over 80% of Americans live in cities. The prime driver of the suburban/rural home price bubble during the pandemic has been an exodus of people from cities, working from home combined with the very low interest rates, also a response to the pandemic, plus deterioration of urban conditions during the pandemic drove these people out. Many didn't move permanently, just decided they wanted a vacation home, they came in very handy during the first year of the pandemic.
Interest rates are going up and people are moving back into the cities as evidenced by up to 50% increase in rents in just a year in many areas. Home prices went way up in NYC and there are lots of stories of lines around the block at the open house with people shouting how they will buy all cash. The desire to buy homes in marginal/rural areas doesn't have to end, it merely has to slow down a bit for prices to drop.
Thanks for clarifying, I see the point you're making here and it makes sense to me. I have often thought the towns in rural Maine, the plains states, etc.. where prices shot up 40% in one year didn't make any sense. The local incomes in those areas don't support the prices, and I do expect that regret will set in when we get "back to normal" and people realize rural America is sadly full of drugs, poor education, poor medical care, with little to do. A lot of people have an idealistic view of rural America until they spend some time there. Absolutely nothing against the people living there, some very great, genuine caring people live there. The decline of industry has sadly destroyed the way of life for many.
Just a note, 80% of Americans don't live in cities, they live in urban metropolitan areas. The majority of Americans live in the suburban areas surrounding cities:
https://www.pewresearch.org/social-tren ... mmunities/
So with that said, I'm not sure demand for suburbs near urban hubs is going to cool off. A lot of people have gotten either full WFH, or in many cases, partial WFH. My office had one day a week remote prior to the pandemic, at the supervisor's discretion. Now everyone has been granted up to 3 days per week, (4 or full with extra approval). The 1-hour car ride is a lot more tolerable when only done 2x a week. To me, the fact that COVID is still here entering year 3 has really cemented WFH in place. People have done their jobs for multiple years now, and gotten things done. It is now an expectation for many skilled, white-collar workers.
It could be the worst of both worlds price wise, since cities have had far more demand than supply, and now will still have demand that comfortably exceeds supply as things get back to normal. Suburbs were already running short on supply and now will probably still have more demand than pre-COVID for the foreseeable future. The White House has published a pretty daunting page on the supply constraints:
https://www.whitehouse.gov/cea/written- ... ng-market/
To me, rents going up means people are accepting higher payments for housing overall. This means even with interest rate increases, people are willing to pay more in their monthly payment. I think it will certainly curb price appreciation (which is desperately needed), but in suburban areas, I'm not so sure there's going to be as much downward price pressure on SFH as people may be thinking. The spring market is going to be very interesting to watch.