US homebuilding surges as coronavirus sparks flight to suburbs, rural areas
reuters.com
reuters.com
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.
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.
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.
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.
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.
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.
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.
Chicken, egg; The family that moves to the suburbs (and commutes) IS the traffic and is the economic and brain drain from the city.
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.
Also local politicians are coming under pressure to “defund the police” and some are taking the first steps toward that goal.
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.
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 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.
Unless a small business, e.g. restaurant, simply goes out of business. As is happening all over the place.
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.
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.
Just as always follow the money.
It is one thing to fear a virus you cannot see and another where you have pictures of destroyed businesses and cars.
Be careful of the media you consume.
It can rot your brain.
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.
A lot of small businesses got destroyed in riots as well, and I imagine their owners would be leaving too.
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.
[1]https://www.theatlantic.com/business/archive/2017/04/why-is-...
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 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 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.
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.
at best, the delta in number of sales has gone up by an order of magnitude.
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.
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.
> 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.
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.
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.
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).
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).
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?
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...
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.
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.
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.
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.
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.
Ha, I see the talking point has changed. Everybody was saying the increase in cases meant nothing because it was all due to testing and deaths weren't increasing.
Now it is a "very small uptick", meaning, for instance, about 300% in the last 3 weeks in Texas.[1]
Darn scared people, like the governor of Georgia, who is so scared of something that he's suing[2] Atlanta's mayor to prevent the city from requiring masks.
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.
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.
If the jobless rate and GDP continue to suffer I can’t see this being anything but bad for rural and suburban real estate.
Who would buy a nice place in, for example, St. Louis right now?!
>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.
Just because there are protests, etc. going on doesn't mean the entire city is on fire...
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.
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.
Is this phrase the same as "I disagree with the parent"?
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.
Behind the Bastards did an episode on it.
https://www.iheart.com/podcast/105-behind-the-bastards-29236...
Are you suggesting Florida has no cities?
850,000 residents in 1950 and 300,000 now. You are right, Covid had nothing to do with it.
My guess is that hot areas are getting hotter and colder areas are getting colder, but COVID hasn’t changed that trend yet.
(I'm also in Seattle and waiting for that to happen before I buy)
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).
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.
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.
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.
What is worth a quarter million? How do you assess the value of your home?
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.
The math just isn't there.
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.
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.
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/
Try to sell it, see what kind of offer(s) you get--that's exactly to the penny what the home's value is.
Tripling in value after 11 years, when you bought at the bottom of the market doesn't seem surprising at all.
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
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.
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.
I suspect that's more ... home projects with folks stuck at home / out of work.
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.
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.
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...
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.
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.
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.
Average percentages usually don't paint an accurate picture.
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.
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 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.
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.
There is a standard exclusion of $250K (filing single) for a property used as a personal residence. https://www.irs.gov/taxtopics/tc701
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.
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!
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.
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.
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.
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 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.
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.
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.
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?
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.
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.