Many people have heard that the real estate market is booming and are, in some instances, stressing out about finding the right time to sell their home. Do I make the renovations, upgrade the kitchen, or replace the roof? If I do, will I miss out on this hyperactive market? The reality is, this is a great time to sell and a rough time to buy. If you know that you’ve got living arrangements, maybe you consider selling. Regardless, you’ll likely be paying for housing unless you move in with family. As far as the housing market goes, it’s driven by a few factors.
One of those factors is the low interest rate environment and that isn’t likely to change dramatically in the next year. These low rates are driven by the government to spur the economy. This helps get money in motion or what they call “the velocity of money”. With an increase in unemployment and continued viral concerns where people are still staying home more, the government needs people to spend and low rates helps that. In addition, with the government issuing so much debt, they can’t afford to pay higher interest on it.
A second factor is demand. Here in Vermont, people are moving from out-of-state in droves and, if this winter has another recurrence of something like covid-19, there will probably be a greater demand than currently. People are fleeing population centers, namely big cities and crammed living environments to find areas which provide more space and the natural distancing that comes with owning an acre or two of land.
A third factor follows #2, jobs & income. People moving here are coming with jobs that allow them to work and/or commute virtually. Buyers income must allow for acquisition of higher priced homes. One common occurrence has recently been out-of-state buyer making offers on housing sight unseen. If people can live here, work remotely, and maintain 6-figure incomes, it will keep the housing market booming. With an enhanced standard of living and reduced housing costs from larger metropolis areas, they are seeing a financial savings. The key factor here is the change in the work paradigm. This change will be impacted more for parents as they learn to work from home and educate their children.
A fourth factor is unemployment. This is what initiated the market demand. When more people are working, they are typically making more money than when not working. With more money, people can afford to pay down debts, develop savings, increasing their credit scores and this allows them to buy their starter home. According to the US Bureau on Labor & Statistics (https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm) since 2016 unemployment rates have been below 5% and as low as 3.4%. It took a couple years of earning income, paying down debts and rebuilding credit for middle America to buy homes instead of renting, but that demand started to drive real estate.
So, if rates remain low and viral concerns maintain… it’s my opinion that out-of-staters will continue to move in with good paying jobs and the housing market will maintain this bubble. These buyers will likely save a small fortune on housing even when buying above market value. They will save money on housing, spend more time with their loved ones, educate their children in this new model and be able to work remotely. Even without an influx of out of state money, the low rates will cause local Vermonters to go from renters to owners or upgrade their homes from a “starter” to “dream” home. Point of all of this: I don’t think we’ve seen the end of this real estate rush. It’s been going for 2 years already and, in my opinion, still has legs to run. You haven’t missed the peak of the market; it may only be beginning!
Corey Hevrin is a Registered Representative of and offers securities through Equity Services, Inc., Member FINRA/SIPC,
354 Mountain View Drive, Suite 200, Colchester, VT 05446
(802) 864-6819. TC116212(0820)1