In Boston, a ten-foot-wide “skinny house” went on the market two weeks ago for $1.2 million, a 33 percent gain over the last time it sold four years ago. That’s more than $1,000 a square foot for what the realtor says is a 1,165-square-foot home (though Zillow says it is only 800 square feet). The house sold in one weekend for an undisclosed amount.
Sold for at least $1.2 million. Photo by Rhododendrites.
Bidding wars in San Francisco suburbs are setting records for premium prices above the asking price. Nearly 7.5 percent of homes are sold for more than 30 percent of the list price.
All over the country, housing markets are going crazy, even in sedate places like Philadelphia. If you have a house to sell, now is the time to put it on the market; if you want to buy, it is probably better to wait.
This housing frenzy is due in part to the coronavirus. More than one out of ten Americans moved in the year after the pandemic began, says Zillow. This is unusual enough that Zillow called it “the great reshuffling.”
People are leaving apartments for single-family homes. They are leaving big cities for suburbs or smaller cities. They are leaving smaller homes for larger ones so they can have room for a home office.
“The main driver is that people want more space, prompting higher sales of luxury, suburban, and rural homes,” says an economist at Redfin. However, reducing the risk of exposure to infections is also an issue: many people are buying homes without visiting them in person in order to minimize risk of exposure to the virus. Such people are going to take exposure risk into account when deciding where to live.
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Affordability is also an issue. Census data show that, between 2010 and 2020, California had negative domestic in-migration (meaning more Americans moved out than moved in), while the highest in-bound moves in 2020 were in Arizona, North Carolina, and Texas, which are among the most affordable states.
Like so many effects of the pandemic, this one merely accelerated pre-existing trends. In 2006, an urban planner named Arthur Nelson claimed that Millennials and other younger generations didn’t want to live in single-family homes and predicted that, by 2020, the United States would have millions of surplus suburban homes, apparently crumbling away.
On one hand, Nelson clearly didn’t understand the basic law of supply and demand. Beyond that, his predictions were also completely wrong. Even before the pandemic, Millennials accounted for more than half of all home loans, and their purchases of single-family homes only accelerated during the pandemic.
Despite Americans’ clear preference for single-family homes, cities are still planning and subsidizing so-called transit-oriented developments and other attempts to increase densities. Planners even want California to reauthorize tax-increment financing so they can give even more subsidies to high-density developments.
Here’s a clue: if you have to subsidize it, then that means people don’t really want it. Don’t try to convince yourself that there is demand for something that only gets built if there are enough subsidies.
Developers are able to rapidly respond to changes in market demand, at least if they are not hampered by government regulations. Urban planners, however, are still enthralled by a form of housing that was obsolete a hundred years ago. This makes them completely unwilling to learn from all the information the current housing market is telling them.
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As unreadable as Nelson has become, he’s not the only one who was making those kinds of grandiose predictions around that time. I’d also like to point to noted New Urbanist apologist Christopher Leinberger, who was breathlessly spouting the same dire “suburbs-as-slums” hype, albeit without the same claims about evidence from public opinion surveys. He was certain as he was uninformed, and he should be held to account for it.
The pandemic has had profound effects on housing markets, and some of its impacts are likely to be longer-term. While it is known that residents of attached, multifamily units (especially apartment complexes) have been more likely to contract COVID, it is unclear how much of a long-term concern this will prove to be.
The impact that does seem like it will be more durable is remote work. There does seem to be some interest in remote work as a longer-term arrangement among a sizable proportion of the workforce. Its effects are likely to operate at both an intraurban and interurban level. The former will lift the constraint of proximity to a physical workplace and allow consumers of housing to buy more of the other things they prefer, including more living space.
At an interurban level, workers in some industries may not need to be even in the same region as their employer. Workers at tech-sector employers like Google, Apple and Amazon may not need to live in the Bay Area or Seattle in order to remain connected to their employer. Both of these developments are positive for housing consumers and housing markets in general.
The last point is about California trying to reinstate TIF in order to subsidize development. This probably shouldn’t need to be said, but even in the panoply of stupid things that CA government authorities do, this stands out. Subsidizing development in an already-expensive housing market will only distort it further and make housing even less affordable for consumers. High prices should be the solution to high prices, but when you break the link between price and cost, you disrupt the ability of prices to convey information about scarcity to market participants. In a place like LA, that’s bad news.
The author mentions a skinny house in Boston is going for $1,000 square feet and that the housing market in Philly, which is one of the densest cities in the country, is going crazy but then seems to only suggest people are only leaving dense urban cities? What gives? Is there some UGB in near Boston and Philly that are causing home prices to be so high or is it high demand and lack of dense urban housing that is driving up the cost.
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However, reducing the risk of exposure to infections is also an issue: many people are buying homes without visiting them in person in order to minimize risk of exposure to the virus. Such people are going to take exposure risk into account when deciding where to live.
” ~anti-planner
No doubt people are doing this. But as a whole it may not be smart. Small exposures to a virus would help most people have some sort of immunity. None leaves them quite vulnerable. We’ve seen this with the RSV virus tearing through children who would normally otherwise not get infected or at least not have severe outcomes. Normally they’d have small exposures; small doses.
As for housing + CV19, I don’t see good reason to believe the markets being affected by people concerned of getting infected. There are some overly paranoid folks. I haven’t see anything demonstrating their numbers are big enough + they’re moving. Maybe it is. After all, absence of evidence is not evidence of absence.