There's More to This Crazy Real Estate Market Than Meets the Eye

There's More to This Crazy Real Estate Market Than Meets the Eye
Posted By Jeffrey Hogue @ Aug 21st 2020 4:15am In: Real Estate

The combination of low available housing inventory, low mortgage rates, and the federal government printing money like never before have contributed to skyrocketing house prices. But are there other underlying factors that make this bullish housing market different?
 

What do the Numbers Say?

Many believe that record low home inventory is a critical factor in rising home prices. I love statistics, so I decided to check the Reading, PA, and Berks County housing inventory figures. According to Bright MLS statistics, there were 663 residential properties listed for sale in July of this year. In July 2019, there were 627 homes listed for sale, which means available home listings are up 5.74 percent. I decided to go back to July 2015, which revealed 663 homes listed - the same as July 2020.

 

Okay, it looks like the number of available homes is actually on the rise, so what gives? Maybe it's not supply but overwhelming demand that is the culprit? In July of this year, 644 homes sold (went to settlement), and 688 were pending sale. The sold home number in July 2020 increased 8.8 percent over the July 2019 figure of 564 sold homes. The most revealing statistic was that July 2019 produced 483 pending sale properties, which means pending sale homes are up a whopping 42.44 percent in July 2020. As expected, the median sale price is up 8.39 percent from the same period last year.

 

It is evident from the numbers that demand is far outpacing the supply even though supply is increasing.

 

Is Fear Driving the Demand for Homes?

When a snowstorm is in the forecast, you better get to the grocery store quickly if you want bread and milk. In the same manner, when we are in the middle of a pandemic, there could be a run on life-sustaining items. My first thought about what is life-sustaining involves four things, food, water, clothing, and shelter, yes, a home.

 

In April of this year, I wrote an article called "Reading-Berks Real Estate Outlook Post COVID-19." The forward-looking piece referred to market events that could take place when Pennsylvania's Governor Wolf let the real estate industry get back to work, which did happen in May. In that article, I stated - "Available homes could become as rare as toilet paper and hand sanitizer." I was wrong - Available homes are even rarer than toilet paper and hand sanitizer. You can hoard all the toilet paper and hand sanitizer you can buy, but you need a place to keep it?

 

Concern for one's wellbeing is valid, and the fear it generates as it relates to shelter can create opportunities for home sellers.

 

The Expanded Role of A Home

Living in or close to a major city was often a more costly undertaking than living in a rural area. The convenience and economic opportunities that a populated area provides often cause an escalation in real estate value. While there remains a property value difference, the gap has undoubtedly closed. In the late '40s, the automobile gave rise to the suburbs, and people did not have to live in the city to enjoy the benefit.

 

The internet age taught us we did not have to go to a store to buy things or to a restaurant to have dinner. We can stay home, enjoy a delivered meal, and go to the movies every night. The age we are living in sets a whole new precedent for how we use our home. It is a cafe, department store, movie theater, office, and of course, shelter. Our homes are like little cities within themselves with all the conveniences just a click away. Yes, our house is even more vital to our well being that ever before.

 

2020 Has taught us we may have to utilize our homes more than we even desire. We may be ordered to stay in our home and only leave if it is essential.

 

Remember when Governor Wolf said real estate was not essential? Wonder what he thinks now?

 

Knowledge is Power!

Jeffrey C. Hogue
 


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