Derek Thompson at The Atlantic attempts to answer the big question on many of our minds right now. Why is the U.S. housing market behaving so very, very strangely these days?
He discusses the usual suspects like low rates, low inventory, and aging Millenials. They, of course, are all playing a part. But there is something else going on as well. And thy name is COVID-19.
– Presently the rich are the biggest beneficiaries of this current situation. Thompson notes that “…a lot of middle- and high-income households took advantage of the pandemic to accelerate their plans to buy first homes, second homes, and vacation homes.” This meant they were looking for bigger homes outside of cities which caused much of the urban flight that we have seen.
– Cities, presently, are the biggest losers. Thompson writes that “the pandemic took a sledgehammer to urban amenities, and downtown rents fell.” But things are about to change.
Here we go again? In 2008, rising home prices and falling rents was the clearest sign something was amiss and eventually lead to the crash of the housing market.
Have no fear. Rising homeownership in the mid-aughts was a result of lax lending standards which is nothing like what we are seeing in today’s market.
So what does that mean for the future. Thompson actually has some good news there, especially for Millenials, “The last decade has punished Millennials with a Great Recession, a slow recovery, and a housing shortage. But the next decade could see Generation Z moving into cities that offer great bargains for young residents, even as they benefit from a booming economy, full employment, and a surge in housing construction.”