The Great Covid19 Housing Migration
Covid19 is reshaping the mortgage and real estate industries in more ways than we can comprehend and causing a migration in housing. I thought it would be helpful to share what we are learning from our clients, and how we view the future and what we’ve learned from the past.
First, despite the crisis, I’m feeling very fortunate currently. So let me say thank you to our many customers, clients and partners. Revaluate has not needed to lay off nor reduce pay for anyone on our team. April continued our growth. Thus, I’m grateful for all of you – you are helping our families. We are fortunate to have you.
If you are not yet a client and would like to learn more, select a time here.
I write this from my home office, at my standing desk overlooking the mountains above our home near Golden, Co – a Denver Suburb. My 11 year old is on a walk at the large open space park across the street. While the parks’ playground has been closed for months, the path and trails have been open and people seem pretty good about respecting social distancing most of the time.
While we don’t have a large yard, I was able to add swings, rings, a hanging reading nook, a climbing wall and monkey bars under our deck for the kids to burn off energy and get fresh air away from their ipads. It was simple and inexpensive and the kids really appreciate having that option.
After living here 3 years, we also finally built and planted our first vegetable gardens. The kids really love helping and watching the little plants growing and are excited about the harvest despite it being months from now.
Many of you in the suburbs have enjoyed this “freedom” and room to roam as we have.
Sick in the City
By contrast, some of our readers are in skyscrapers in major markets across the country and have been cooped up in apartments that are frequently petite by comparison to those found in the suburbs.
The draw of living in the city is proximity to everything and everybody. I’ve long valued the ability to simply walk to so many unique places. However, with this virus – those assets have become detrimental. From inside the walls of the apartment, parks, gardens, swings and fresh air must seem like eden.
In the 20s, People fled the city initially, but there was a population surge and building boom which came years after the Spanish Flu with a boom in industry and technology.
According to Zillow data, “Page views on for-sale listings on Zillow fell as much as 19% year-over-year in mid-March, but have rebounded sharply since then”. (they glaringly didn’t say to what level – so I’m skeptical it’s back to near par) Search demand for urban has dropped, and the suburbs and rural properties is on the rise. This makes sense, as the value and appreciation of open spaces, parks, and areas of lower population density has increased exponentially in the last 2 months.
Predictably, transactions in Manhattan are down 77%.
It stands to reason that the desire to move away from people will translate to value changes. There are reports of people like “Stan and Julia Usherenko who paid $25,000 over the asking price for their new home in Midland Park, New Jersey, after viewing it just once last month on the final weekend that open houses were allowed.” At this point, we are not sure how widespread it is in reality.
All suburban and rural Revaluate employees reporting modist to strong gains in Zestimate value over the last two months ranging from just under ½% to 4.5%. In the comments below, let us know what you are seeing in your areas.
Yesterday, on a call with a client who specializes in the insurance industry, we learned of a bombshell for the housing industry. But it may be a good explosion.
We will keep the insurance companies name confidential, however they are projecting a “Massive relocation of people” due to the effects of covid19.
So what are the specific reasons?
Safety: It’s projected that people will move out of the cities for the space and “safety” of the burbs in large numbers.
Deaths: There is also the grim reality that with around 80k deaths, and with projections by June first of 3,000 deaths per day – there will be many families selling properties that are now vacant.
But both of those pale in comparison to the real catalyst: Job loss and reduced compensation.
Job loss: More than 30 Million jobs have already been lost, causing families to no longer be able to afford the properties they have been occupying. These homes will be put on the market, as the underemployed move to rental properties with lower monthly expenses.
The Covid Migration may double the number of y/y movers.
With the underemployed, they will stay in the lower priced home and two things will happen:
They will realize they miss the mortgage deduction on their taxes – reminding them one of the many benefits of home ownership. They will also have to reinvest the earnings back into real estate to avoid penalties. Secondly, at some point they will get their feet back under themselves, and purchase a new property. The underemployed will see multiple moves in a relatively short period of time.
Movin’ on Down
In the New Jersey suburbs just outside of NYC, one of our clients reported that she received 6 referrals – all from people in NYC wanting to get out. They want less population density, yards, parks and room to breath fresh air.
Short to long term rentals away from the city are booming. “Steven Magnuson, a Douglas Elliman broker in Greenwich, Connecticut, recently rented a modern, five-bedroom home with an infinity pool there for $55,000 a month, a record for the town. Now, the house is available again and the owner raised the rent to $65,000. Even with the higher rent, there’s a waiting list of 18 people waiting to see it and rent, Magnuson said.” Via CNBC
People are buying second homes also. “Jeff Serouya, with Berkshire Hathaway Home Services/Hudson Valley Properties, and a New York transplant himself, said there simply aren’t enough homes on the market in the area to meet demand. He just sold a 3,800-square-foot stone house in High Falls, in Ulster County, listed for $839,000.” Via CNBC
The Migration is already starting, the impacts will be significant and those of us in the industry may have the opportunity to help more families find a better, safer location to live. It will be very interesting to track home values and demographics associated with these Covid movers. We will keep monitoring the situation and report back as we learn more.