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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe housing market is roaring now. Here are the worries that reveals.
One thing, above all, was relentlessly drummed into me at the University of Chicagos Booth School of Business: You, private citizen, should not attempt to outguess the market. Asset prices represent our collective best guess about the future value they will return to owners. Those guesses are often wrong. (Predictions are hard, said Yogi Berra especially about the future.) But your guesses are at least as likely to be wrong as everyone elses, so theres no point wasting money, or mental energy, on trying to time your bets.
The past six months have taken much away from me, but they have only built up my faith in this axiom. Had someone asked me in March, I would have predicted that after six months of pandemic, the housing market would be full of panicked people frozen in their homes, except for those who were being evicted. Instead, the housing market is roaring.
I wont sully my diploma by prophesying some inevitable collapse. But I will outline my short-, medium- and long-term worries about what this reveals.
In the short term, the housing market tells a story of two Americas. One has the educated and professional classes, most of whom can work from home. Theyre breaking leases to move to the suburbs or the country; trading up to bigger places; taking advantage of low interest rates to refinance; building additions for the new home office.
https://www.washingtonpost.com/opinions/the-housing-market-is-roaring-now-here-are-the-worries-that-reveals/2020/09/04/6e62f058-eedd-11ea-b4bc-3a2098fc73d4_story.html
jimfields33
(16,018 posts)Interest rates are down. A house down the street sold in a day. Five sold in last two months. The thing that must be realized though is property taxes are going to have to go up. All over the country, counties have hardly any revenue.
nitpicker
(7,153 posts)In Northern VA, there is pent-up demand because "Amazon! Amazon! Amazon!" is coming. Looking through ArlNow, I saw two lower stories of a 4-level townhome ((three bedrooms, 2 1/2 baths)) within 2 blocks of Amazon's planned VA HQ, being flogged for 690K.
((This is about 100K above what similar units were being sold for last year.)
Northern VA is partially slump-proof because of the large federal worker and contractor workforce presence (plus some military). Those jobs aren't going away anytime soon.
But what if Amazon and others let lots of people work from home, most if not all days? Less increase in office space needs, so less increase in commercial real estate revenue for Arlington County, less revenue increases from the bars and restaurants on Restaurant Row and elsewhere nearby. Maybe people will "work" from Fredericksburg if they can get 5 bedrooms and 4 baths on a a half-acre and only have to go in one day a week, so the real estate housing bubble might pop too.
The real hits to county revenues are those associated with restaurants, bars, travel and hotels (especially with the rise of videoconferencing). The IRS was to have held a conference at the Gaylord Hotel in Prince Georges County MD over three days. Instead, it was one video session a time over 5 weeks. NO revenues to counties from hotel business, taxis and rental cars from the airport, etc. And people cooking up a 75 cent turkey burger for lunch instead of spending $10 plus tax for takeaway burger.
Contrast this to Remote County. Its big employers are the regional university and a motorcycle plant. It just told its students to go home all over the state and others ((except for the international students in dorms that it is now repositioning, socially distant)). The motorcycle plant is booming, but with the bars shut, workers are going to the Less Far County Walmart to stock up there. What tax revenue for Remote County?
As I said, it depends which county you are in.
MontanaMama
(23,356 posts)Theres a house across the street from me thats under contract at $600K...and its a gut. Nothing worth keeping. A lot up the block on the creek just sold for $995K. No house...just the lot....its on the creek, so it is desirable but a million dollars??? Around the corner from my house, a 2 bedroom 1 bath home sold for $800K and it was leveled to build a 3 million dollar home. I only know that because my neighbor was the contractor. A one bedroom one bath brownstone apartment (100 years old btw) that I used to live in while in college is now a condominium...it is under contract at $325K! A quarter million buys something I wouldnt live in.
There are so many people here from out of state to escape the pandemic that homes are being sold in bidding wars sight unseen. A good friend is a mortgage loan processor and she wrote $1400 mortgages for out of state buyers last month. There are no apartments for rent either because so many people are renting short term while they wait for a house to open up in their price range. I have never seen anything like this. It is kind of disturbing.
rgbecker
(4,834 posts)When that much money is dumped into the economy and the rich are looking for a hedge against the possible market crash coming when people suddenly realize there is an end to the money printing machine, those rich are looking for real estate. The Fed is even telling us they are going to accept a higher inflation rate and a quick check shows building materials sky rocketing. Hold onto your hats as the money and all the assets are transferred to the rich from the already struggling working class. Your $600/wk, if you ever get it again, isn't going to buy shit.
csziggy
(34,139 posts)She has never been this busy. She's working 12 hour days Monday - Friday and part days weekends. It's crazy.
Yavin4
(35,450 posts)Businesses are finding that people working from home increases their productivity. A lot of energy is lost in arduous commutes.