Bidding Wars Erupt for Single Homes
The dream home of the moment is a single-family complex with a yard and a swimming pool. You’d think now is prime time to buy it, but such a house, if you can find it, is more expensive than before coronavirus struck in many residences in America!
Don’t throw your economics textbooks on the fire just yet; falling incomes have indeed led to falling demand for new housing. The catch here is that the number of properties on offer has fallen faster, and the reasons for this are two-fold.
We see the newly unemployed get protective over their hard assets, and realtors are delisting homes that can’t be toured without a breach of public health guidelines.
The upshot of this is that bargains are still hard to find. We’re in a seller’s market with too few homes for too many hopeful homeowners, just when economists expected a buyer’s market. If current trends prevail, things could end up getting even more extreme.
It’s tempting to take out a mortgage when interest rates are at rock bottom, so more everyday people should enter the market as the economy recovers. This could happen before we’re allowed within two meters of each other again, and before beaten up, highly-levered foreign trusts feel ready to get back in the game themselves as sellers.
If things play out as such, bidding wars will separate the ‘haves’ from the ‘have nots’ as an opportune wealthy class pounce on property. The first rung of the housing ladder is already way high; governments will need to intervene to prevent a social crisis.
The other direction house prices could go; down. The chief economist at Moody’s Analytics thinks repossessions are looming as homeowners foreclose under financial pressure, so that will put more properties up for bidding. Going. Going. Gone!