If you are like most people in this country, you have spent more time sheltering in place during the pandemic than you could have possibly imagined. Aside from COVID cabin fever over the past year, another pandemic-related phenomenon has emerged in this time like no other: the most head-scratching housing market since 2009.
The current housing market reminds me of a famous television commercial from the 1980’s for “Crazy Eddie” home electronics and entertainment business. At the end of every commercial New York City radio personality Jerry Carroll would scream at the camera, “Crazy Eddie, his prices are insane!” Except as a buyer in this case, they may be insanely higher.
Thinking of building a house, upgrading, downsizing or rightsizing your home, or looking for investment properties or a vacation home? Well, there hasn’t been a crazier housing market than what we are experiencing today since the subprime mortgage fueled housing crash of 2009. That was a buyer’s market.
Today it’s the opposite in many places. It’s almost totally a seller’s market. If you have a place to sell in the hotter markets, you could enjoy a big bump in your sale price courtesy in part to the historically low mortgage rates, the incredibly low home inventory and the increasing exodus from certain major cities. Some of these issues started prior to the pandemic but, make no mistake, COVID has fueled so much uncertainty that all of these have been accelerated. Refinancings are at a high because of the low rates and since so many people have been either been forced to tap into their home equity to pay bills or are using the low rates to remodel their homes (especially home offices).
But before you get too excited about putting your house on the market, you better have figured out a place to move to because there is record low inventory in many towns and suburbs across the country. Here in Happy Valley, we are experiencing it as well. According to local realtor Greg Copenhaver of RE/MAX Centre Realty, last year at this time there were 400 homes listed for sale in this Multiple Listing Service (MLS) area while this year there are only 177. “In my 35 years as an agent, this is craziest market I’ve ever seen,” he said. “It’s the toughest time for agents ever.”
As they often say in the real estate business, timing is everything and it’s all about location, location, location. Bob Langton of Keller Williams Realty said, “The shortage of inventory isn’t just here; it’s nationwide. There is a hesitancy for some to list their home because of the workplace uncertainty.”
Housing sales and prices, according to CNBC, are going through the roof in places like Austin, Texas; Phoenix, Arizona; Nashville, Tennessee; Tampa, Florida; and Denver, Colorado. The three markets that are predicted to most likely underperform are, as you would imagine, New York City, San Francisco, and Los Angeles. Other areas that are hot include Boise, Idaho; Las Vegas, Nevada; Charlotte and Raleigh, North Carolina, and just about every suburb of major cities in the state of Texas. In general, many people are moving away from downtown areas because they are either spooked by the virus, tired of high city taxes or because they can now work remotely from anywhere.
Another trend that is a factor in this housing market are the number of Baby Boomers who are voluntarily leaving the workforce for early retirements after going through a COVID-inspired reassessment of what matters most in their lives. So, you have this conundrum of Baby Boomers competing for the same homes as Millennials in many parts of the country.
Copenhaver added, “You have move-up buyers with growing families competing for homes and driving prices higher and higher. Then there is the ‘one floor living frenzy’ created by retiring Baby Boomers looking for ranch style homes and homes with first floor master suites that aren’t available.”
No one has the crystal ball of when this will calm down, but what anyone looking to build or buy a home must do is educate themselves and be aware of the shifting tides.
So, from where my wife and I are in our stage of life, here’s how I see the good, the bad and the ugly of the current market as it impacts our options:
The Good: The value of our current home has gone up significantly in the past year and there are so few homes in our price range for sale that we would likely get top dollar for our home in the very desirable Stonebridge neighborhood in Ferguson Township.
The Bad: Prices in our desired type of home whether we downsize here or retire down south have gone up significantly as well.
The Ugly: There are fewer homes for sale because as soon as they come on the market, they almost immediately get multiple offers and are subject to bidding wars.
So why not just build a house? Not so fast. Construction material costs are through the roof, and good luck finding a builder in the hotter markets. Langton told me that there are more lots for sale and people are buying and sitting on them until construction prices fall. He added, “The problem is that once material prices reach a certain level there is no guarantee they will come back down.”
The pandemic has made a lot of Baby Boomers rethink retirement plans (including yours truly). Some people were downsized from the workforce or offered early retirement packages while others simply said, “I’ve had enough.” Suddenly the numbers of people looking at retirement properties in North Carolina, South Carolina, Florida, Texas, and Arizona has increased dramatically. Realtors in the hot retirement areas can’t believe what they are seeing.
A real estate agent in Hilton Head told us a home was listed recently and within 24 hours they had 30 inquiries, 10 offers and the house sold for $30,000 over asking price to a couple from Long Island who “toured” the house virtually. People are so desperate in some cases that they are willing to forgo home inspections, are being overly generous on contingencies and are buying homes sight unseen after doing “virtual tours.”
A good family friend, who has a property just off the beach in Hilton Head, was contacted by a real estate agent who said he had a client who wanted to buy his home immediately. Our friend said he wasn’t interested in selling. The agent said his client (from New York) was willing to pay several hundred thousand dollars above the value of the home.
COVID has created a bit of a silver lining for us as our two older children have worked remotely from our home for the past year. But as the pandemic winds down they will likely move out and in two years our youngest will graduate from Penn State, leaving us as true empty nesters. As we continue our research on what we might do in our next chapter we have some tough choices ahead. Do we downsize to a condo here and buy a second condo down south? Downsize here and do the traditional snowbird strategy and rent down south from January to May? Sell our home here, move south and do the reverse snowbird, and rent back here during the summer?
We’ve made two trips to the Lowcountry between Hilton Head Island, South Carolina and Savannah, Georgia, in the past six months. We are attracted to this area because we have vacationed in Hilton Head numerous times and it provides all of the amenities on my bucket list. There are over 700 Penn State alumni living in the Lowcountry and the alumni chapter is active and fun. A number of good friends, former hockey teammates and golf buddies are living there or planning to in retirement. There are active retirement communities, golf and tennis communities, terrific restaurants, great weather, two airports (with regular flights to Pennsylvania) and, of course, the beach. The fact that a new 7,000-seat hockey arena (and minor league team) will open next year in Savannah could seal the deal for me.
Yes, we have some decisions to make just like a lot of you. Buying or building a house is one of the most important (and expensive) decisions people will ever make. It’s also one of the most stressful.
Beware that some banks and mortgage lenders will loan you significantly more money than you really should spend, and if you get caught up in the excitement, you can end up house poor.
Do you really want to be up to your neck in mortgage costs? I have found that many first-time buyers underestimate what they will spend on real estate taxes, furniture, utilities, landscaping and home maintenance. Young couples planning to have kids in the future forget to factor in day care or that one spouse may be working reduced hours to stay home to care for the kids. Retirees forget to factor in quality of medical care and that getting around will become increasingly tougher. Your stage of life and desired quality of life have to be factored in as well as job stability and future career plans.
People bought property at a frantic pace in 2007 and after the great recession hit in 2008 the resulting foreclosures in 2009 were at record numbers. Buyers with cash were able to get “deals of a lifetime” on foreclosed properties. Many of the people who bought at the height of the 2007 housing market and used adjustable-rate mortgages (ARM) are still trying to recover financially. Be sure you do your research and understand the finances involved.
One more cautionary tale. The importance of picking the right real estate agent cannot be underestimated. The good ones, that are the most trustworthy, are going to ask you all the right questions and get to know your situation before just selling you on the first house that comes along. In searching for an agent in South Carolina, we came across more than one who we felt wasn’t looking out for our best interests.
We gave several agents our price range, type of home, location and amenities that we desired. One of the agents sent us back listings as much as $150,000 over what we gave as the high end of our range, in areas we had no interest in exploring. They were obviously looking at their commission and not our needs first.
There are always different solutions and ways to get to your ideal situation. You may have to compromise on your price, the timing, the location, the style or you may simply have to be more patient. Regardless of whether you are relocating, upgrading, downsizing or thinking of building, you have to be vigilant in this market where, “The prices are insane!”