There is a Chinese curse that declares, “May you live in interesting times.” What we’re living through may be a curse or a blessing as it relates to real estate, and I predict we won’t know for quite a while.
For nearly two years, there has been a convergence of events that have influenced every aspect of our lives. As it relates to the real estate market, COVID-19 drove us into our homes, locking down with families, working on computers for both school and work. Because of this, the trend in remote working has exploded. Prior to the pandemic, only about 10% of the labor force worked remotely full time. The forecast now is that as much as a quarter of the labor force is expected to stay fully remote in the long term.
This fact is encouraging existing businesses and new businesses to change their plans for the future. A whole new economy is being developed based on remote workers who can relocate to smaller cities and regions anywhere in the country. Real estate prices are booming in regions where no one previously expected this kind of growth.
The second thing that has happened during the past two years is the millennial generation waking up to home ownership. Broadly, millennials are defined as being born from 1981 to 1996. They have now surpassed the baby boomers to become the largest living adult generation in the country. With the oldest of the generation approaching 40 compounded by COVID and remotely working, millennials now represent the majority of home buyers, accounting for more than half of all home purchase loan applications last year.
Millennials had faced several challenges getting started in homeownership. The financial crisis of 2008 set them back in their careers, denying them the opportunity to save for down payments while managing their student debt. In addition, they had a distrust of homeownership as an investment after the crash of the housing market and they did not expect to accrue large equity in a home the way their parents did. Most of them went on to rent and spend their money on travel and other life-fulfilling activities that didn’t involve mortgage payments and family.
Many of them moved back home to the suburbs and their childhood homes, leaving city life behind during COVID lockdowns. They started to appreciate the safe environment and space where they grew up and started taking another look around.
By the time they made their decision to move on with their adult life and purchase a home, the COVID housing boom was well underway, leaving them in the dust again. Nevertheless, they became the dominant buyers of homes in the country, helping to spark the surge of home prices and lack of inventory.
Because of this generation’s appetite for homeownership, many economists forecast homebuying demand is likely to remain strong for years to come. In addition, housing analysts don’t expect a wave of sustained home price cuts for quite a while, according to the Wall Street Journal. Between the pandemic and the popularity of remote work, the millennial home buying trends will probably continue.
Aside from agreeing that we do, indeed, live in interesting times, it’s impossible to know what the next chapter in the housing market will be. We’re all anxious to see what the Florida winter selling season will bring. Everything changes – even desktop computers are back in vogue.
Who would have thought that?
