Why Real Estate Is Steadily Increasing In Spite Of The Crisis
Despite the turmoil that our country is currently facing, real estate prices are continuing to increase. Why is that?
Unexpected Outcomes
Many bears expected the real estate market to be in a deep decline already. Rising unemployment, the coronavirus pandemic, and nationwide protests are factors that should have hurt the economy, but that hasn’t happened. In fact, the opposite is true. What’s going on?
Not only has the US real estate market not crashed yet, but new records continue to be set. This is being seen in luxury property markets, in the suburbs, and even across the nation in growing average home prices.
According to Realtor.com the US average home price continued to rise through May 2020, reaching a new high of $330k. That’s even before peak summer season kicked in and full reopening of the country happened. At the same time inventory actually declined 20% year over year, and homes were still selling at a brisk pace of an average of 71 days on the market.
A Change in Consumer Behavior
What’s driving this trend, even among historical disruptions to the economy and way of life? Savvy individuals, families and fund managers are not only under the most urgent pressure ever to move homes and restructure their living situations, but they see the immediate need to put money in real estate versus public stocks, cash, or cryptocurrency. All of these other assets look very fragile in comparison.
They are doing it for safety and cash flow. If everything else fails, this hard asset will still be there, and able to deliver income. Even if the dollar falls, that can be great for international investors who will get great discounts on paying off any mortgages on properties over time as their own currency rises.
The wealthiest families are those who have hung onto their real estate for the long term. There will be opportunistic deals in the mix right now, but also great buy and hold properties that will benefit from the coming tsunami of renters.
