The NYT asks: Will Real Estate Ever Be Normal Again?
The New York Times published a long piece in the NYT Magazine this weekend. Here’s a direct link (including audio format): Will Real Estate Ever Be Normal Again? – The New York Times (nytimes.com) If you don’t have access through the paywall, here’s a link using our monthly gift share feature: Gift share link And here’s a link to the text in a PDF in case that fails as well: PDF version.
It’s a very long read and focused on the Austin real estate market. There are concepts that relate though to the market here at the shore. Like in so many other things, it’s probably wrong to attribute sweeping trends we see now in real estate only to Covid and the pandemic. The fact is that the surprise of the pandemic was more catalyst than revolution. It’s not that it changed everything so much as it sped up a number of changes. This feature discusses a major change.
Real estate is largely driven by demographics. Everybody has to live somewhere. The dominant demographic now– accounting for over half of all home sales this year– are millennials. We can roughly assign that demo the ages of 21 to 40. Obviously, millennial buyers and sellers have been more concentrated in the primary home market. However as they age and become more wealthy, their influence here in the second home or vacation home market is growing as well.
This generation came of age in a worldwide recession unique from other recessions in that the cause was specifically residential real estate and residential real estate financing. This combined with other trends like delaying marriage and child bearing has long been given as the reason there was a reluctance and delay among this demographic to be as engaged in home ownership as generations before them. The tide seems to have turned.
This is the first generation that has been exposed to the internet and the modern economy for their full lives. Because of this, there is a trust for obtaining information in ways that previous generations were not. Video home tours and at-a-distance real estate information presentation and analysis are far more acceptable to them than the on-the-ground tactile banging-on-the-pipes-and-bones style of previous era home shopping. This combined with at-home “window shopping” with Zillow and Realtor.com led to an incredible new force in real estate in the last year: super-speed. Whereas before it would take days and even weeks just to get enough people into see a home on the market to generate interest and multiple offers, now in 2021 agents giving video tours were queuing interest in an afternoon. Multiple offers happened and the rest is recent history.
“Life hack” life-style culture has also contributed. The real estate investor of the past was often a person with a background or family history that had shown them how to build wealth with real estate. Now, social media and access to information taught many young people the tools at their disposal. Where else can a person with no assets get hundreds of thousands of dollars of leverage to purchase things? You certainly can’t get a loan from a bank to buy stocks. Getting a loan to start a business is arduous. However, the process for a mortgage is designed for relatively easy access for all. Lie hack advice has taught people to see this not as simply a way to have a home for your family, but as a financial tool for wealth building.
In addition to the big investor, millennials are buying homes they see as investments or homes that they use as investments. As their wealth grows, we will undoubtedly see more of this at the shore as well.
There’s a lot to unpack in the article and it is only one aspect of the trends emerging as we exit the pandemic. We will touch on others as we go forward. In the meantime…
As always, you can see everything that was listed, put under contract, or settled and sold last week in Avalon, Sea Isle, Stone Harbor, and Upper Township with the links below.
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