Who knew the pandemic would set off a housing boom, the likes of which haven't been seen since 2005? According to an article in Forbes (Richardson 2021), "U.S. housing gained about $2.5 trillion in value in 2020 — the most in a single year since 2005, according to a new Zillow analysis. The full stock of U.S. housing is now worth $36.2 trillion."
As work from home options grew, so did people's desire to move to places they'd only dreamed of living before.
But now, assuming the Delta variant doesn't begin a second lockdown, some companies are abandoning their work from home and hybrid options and demanding employees return to work in person.
So, people have some serious decisions to make. Do they quit their job, stay in their new location, and find a job that allows them to work from home? According to the Pew Research Center (2020), more than half of all Americans want to continue working from home, even after the pandemic is over.
Another option is to sell or leave their new home, return to their old location, and go back to work in person.
It all comes down to what each individual wants their post-pandemic life to look like.
Location, Location, Location = Decisions, Decisions, Decisions?
In this new housing market, there are many things to consider. If you moved away, should you stay or move back? If you currently own a home, should you sell? Could you even find a new house you could afford if you did?
Here is a compilation of our thoughts based on questions we've been getting from our clients.
To Sell or Not to Sell / To Buy or Not to Buy Here are some important considerations when it comes to buying and selling:
Can you afford the down-payment and the monthly costs of a new home? Think about the mortgage, taxes, insurance, maintenance, and repairs (even more important now since many buyers are having to waive their inspection to stay competitive).
*To get a better picture of the of the impact that a home purchase may have on your
monthly cash flow, consider creating a monthly budget with your current expenses and
then modifying it to include the new expenses that would come from a new home. Be
realistic with the ongoing expenses, and don't forget to account for travel, retirement
savings, and an emergency cash reserve!
*Here are some rough estimates for calculating ongoing housing costs. (These vary by
location and are just estimates.)
Property taxes per year- 1.25% of home purchase price (Bay Area) Maintenance and Repairs per year- 1% of home purchase price Homeowner's insurance - $2,000 per year (this is an average and does not
include any special riders, fire, earthquake, etc)
Can you afford the additional insurance for fire, flood, hurricane, or earthquakes -- depending on where you live? Given the changes in our climate, this insurance is something you'll want to consider having to protect your home and property should something happen.
With the rise in prices, can you get a better home than the one you'd be leaving, or would you be making a lateral move for the same or more money?
Are you prepared to make an offer that's significantly over asking or without contingencies? According to an article by Michele Lerner of The Washington Post, buyers are having to offer over asking, waive inspections, and waive appraisals just to be competitive in hot markets.
Next month, we'll dive even deeper into the housing market and what you can do to be prepared.
Articles Referenced
Lerner, M. (2021, June 3). Competitive home buyers waive contingencies to score homes in tight market. Washington Post. https://www.washingtonpost.com/realestate/competitive-buyers-waive-contingencies- to-score-homes-in-tight-market/2021/06/02/d335b050-af2c-11eb-b476-c3b287e52a01_story.html
Richardson, B. (2021, January 26). Housing Market Gains More Value In 2020 Than In Any Year Since 2005. Forbes. https://www.forbes.com/sites/brendarichardson/2021/01/26/housing-market-gains-more- value-in-2020-than-in-any-year-since-2005/?sh=3650624fe08c
Parker, K., Horowitz, J., Minkin, R. (2020, December 9). How the Coronavirus Outbreak Has – and Hasn’t – Changed the Way Americans Work. Pew Research Center. https://www.pewresearch.org/social- trends/2020/12/09/how-the-coronavirus-outbreak-has-and-hasnt-changed-the-way-americans-work/
The Sweet Side of Finance
Tune in to the blog at the end of the month for my latest recipe (which my newsletter readers already know about).
This month, the weather is heating up and so is the housing market. Given that, I decided to do a recipe with a little kick.
Stay tuned!