| Hi Taylor:
I've been reading about how there hasn't really been a dip in homebuying
even with COVID and the economic struggles. Any idea where the market's
headed? - Nina
Hi Nina: Real estate, like everything else, has been pretty interesting
in 2020. When the economy first shut down in March, home sales tanked.
Since then, people have been buying at a pace close to what we saw
in 2006 before the bubble burst. It's hard to offer a long-term projection,
but I've got some thoughts about what we're seeing right now.
rates are too tempting. Rates have hovered around zero for
more than six months, and the Fed has indicated they should stay
low for years to come. This is having the desired effect, with
lots of people rushing to the bank to get great mortgage rates
and become homeowners. Sales are up over 10% from a year ago and
houses are staying on the market for barely over three weeks on
average. Things are still volatile and I can't say how long rates
will keep buyers motivated, but it's definitely working at present.
2. Inventory is low. A big part of the reason houses are on
the market so briefly is that buyers don't have a whole lot of
options. Especially in cities, and more and more frequently in
suburbs, the number of houses on the market continues to be sparse.
And while sales are still high, the inventory problem is driving
the price up and making it difficult for a lot of middle-class
buyers. This has been a problem for a while, and it certainly
won't get better as lumber prices have shot up due to all the
fires on the West Coast. Building had already slowed because of
pandemic protocols, so anyone who sees sales numbers and thinks
that the overall market is thriving is ignoring a large, looming
3. Wealth disparity. As I mentioned earlier, we've seen that
the economic impact of COVID-19 hit certain demographics harder
than others. A lot of people in healthcare, education, and hospitality
are still out of work, likely taking them out of the pool of perspective
homebuyers. It's always the case that the wealthier professionals
will be quicker to buy a second house than someone with a smaller
salary, but we're definitely seeing that reality amplified. Moguls
from all industries have access to the same low interest rates
as those who are struggling, so the homebuying market and the
price escalation is fairly skewed right now.
| These are the
factors that I've been tracking over the last few months. It's nice
to see the market doing well, but always good to keep an eye out for
what might make the other shoe drop. Thanks for reaching out!
© Taylor Kovar
September 28, 2020
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