ARBOR OUTLOOK: Home prices, sales trends and John Anderson
Margaret R. McDowell
"I saw roses choking in the grass ... Flaking paint in a broken window pane; A mailbox barely standin' by the driveway ... I can almost read the name." — from “Just Came Home to Count the Memories," as performed by John Anderson The latest statistics reveal that housing prices and sales volume may withstand the economic downturn associated with the pandemic. Various areas are, understandably, reporting differing numbers. These statistics reflect early results and don’t necessarily portend long term trends. Basically, the housing market is on hold. Many sellers have taken their properties off the market, primarily because of health concerns in showing their homes. A large housing "pandemic discount" has not occurred. The Great Recession was commensurate with and was, in part, caused by a collapse in real estate prices that was fueled by an oversupply of product. When supply dwindles, as it is doing now, this helps establish a floor under home prices. Many city dwellers were considering a move out of urban population centers prior to the pandemic; the health scare has accelerated that exodus. Let's say you and your spouse have one child and live in an apartment in New York City, where both of you work. The pandemic has proven you can work from home effectively. Does the idea that you don’t have to commute on a crowded subway and raise your child in a dangerous health climate appeal to you? One would think it would. So houses for sale in smaller (read safer) communities look more attractive. This should lift suburban housing markets outside of major metro areas. There was already a move afoot of residents relocating to areas with friendlier state income tax laws while fleeing states with high property taxes. Former residents of New York, New Jersey and Connecticut are flooding Florida and purchasing homes. Of course, there is a flip side. They have to sell their existing homes back East, where there’s an oversupply of product and an undersupply of buyers. Florida’s housing boom is Connecticut's housing downturn. Not all metro areas are holding steady. The Dallas Morning News reports that April saw the biggest annual decline in home sales in nine years there, with home purchases down 17% from a year ago. Home sales had been up by 9% in the year’s first three months. Pending home sales are down 22%. Median home prices in some Dallas suburbs are down 35% from a year ago. So this is a huge and sudden downward swing. Far fewer Americans are in purchasing mode now, with millions having lost their incomes, which could hurt sales volume. Not to mention the fact that mortgage lenders are much more hesitant about offering home loans in such a precarious economic environment. More stringent lending requirements are becoming prevalent. But that effect may be countered by extremely low interest rates available for most types of mortgages. Rates could drop even further in coming months, which can cause those with deployable cash to more strongly consider purchasing a new or second home. Margaret R. McDowell, ChFC, AIF, author of the syndicated economic column "Arbor Outlook," is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a “fee-only” registered investment advisory firm located near Sandestin.