I have been practising real estate in the city of New York in the United States since 2002, and I have never experienced such an active real estate market like this ever before. It was almost like right before 2008 when the real estate bubbles blasted but the situation is totally different now.
After the Covid-19 lockdown was lifted in the US last June of 2020, the pent-up demand of home buying activities boosted up real estate market, but at the same time, buyers’ trend also changed.
Because people’s work style changed during the lockdown, many office workers do not need to commute and work to and fro their offices. Instead, most people worked from home or only went to work a few times a week. Therefore, there is no need for them to live within a nearby commutable area from their workplaces which required easy accessibility to public transportation. However, they needed to have a larger home where they can have more room for their home office space where they can Work From Home (WFH) without any distraction.
According to the record of USPS (United States Postal Service), about 333,000 households have moved out from New York City since the pandemic last year. (Reference: https://newyork.cbslocal.com/2021/01/08/moving-out-of-nyc/amp/)
More people have also migrated to smaller apartments in urban areas and suburb areas where larger houses are available at lower pricing. For the price of a one room apartment in the downtown area for instance is equivalent to getting an entire house in the suburb area. Therefore, buyers are moving towards the direction of the suburb areas where more space is available.
According to Unacast, which analyses anonymised ell phone location data, some 3.57 million people have already moved out from New York City.
(Reference: https://mobile. reuters.com/article/amp/ idUSKBN28P1Q8)
Another reason consumers are starting to purchase homes is that the residential home mortgage rate has hit a historically low rate since the pandemic. Currently, most of the banks offer a fixed loan mortgage interest rate of 3% for 30 years, if not less. That lower rate creates more demand towards the purchase of homes while boosting residential home sales, hence causing prices to rise.
Moreover, due to this circumstance, the market has shifted to an extremely low housing inventory. Entering into the sellers’ market. sellers are experiencing multiple offers and biting war if the prices are displayed on the house listings on the market in suburb areas where there is strong demand.
This situation also causes the increase in prices. According to a 2020 statistics report, home prices have increased by +9.2% Core Logic, Federal Housing Administration (FHA) +10.8% by FHA, and +10.4% by S&P Case-Shiller Index.
Currently, because there is such a strong demand of homes but less inventory, the data on the number of homes sold are slightly declining because there isn’t enough homes to sell.
And, multiple offers create appreciation of home prices.
It is hoped that more housing inventory will be coming to the market to meet demand in the second half of 2021 and to ascertain if the mortgage rate will remain stay low despite the Central Bank’s rates rising for rest of the months in 2021.
* Opinions expressed here are those of the contributor and are accurate at the time of print.