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The notion of “home sweet home” has been one of many concepts taking on new meaning as result of the COVID-19 pandemic as people sought refuge from the deadly virus with many workplaces shut down. The latest turns in the housing market are discussed in the latest edition of “On The Money” with housing market expert Rick Sharga. As an executive and spokesman with RealtyTrac, Sharga first came to prominence as an expert during the housing market collapse and ensuing financial crisis over a decade ago.
While noting there are some “superficial” similarities between the previous sharp rise in home prices which ended badly with millions of foreclosures in 2008 and the current situation, Sharga says it’s very unlikely the market melts down in similar fashion again in the near term (2:15). This time, he notes that supply and demand are driving home prices with older millennials entering the market. “Historically low mortgage rates” are another factor, he says.
In addition, Sharga says 70 percent of people buying homes in the U.S. are “move-up buyers,” or those moving from one home to buy another (3:35). Helping to prevent another similar meltdown, Sharga notes that reforms — some imposed by law with others by the industry — have combined to result in higher mortgage loan quality (4:40). That also means it has become more difficult to qualify for a home loan.
Speaking of one regional red-hot market, Sharga cites figures that the median home price in the state of California is $800,000, which he calls “mind-boggling.” One impact of that, Sharga says, is that a generation of young prospective homebuyers are being priced out of the market. For those who can afford it, however, Sharga notes that home prices do tend to rise over the long term (6:10). In the short term, he reminds, home prices can go up and down, and people “need to be ready for that kind of volatility” (7:45).
As the pandemic has shaped demand for homes in suburbs, far out suburbs and “second-tier markets” (in terms of size) including Nashville, Tennessee; Tulsa, Oklahoma; and Columbus, Ohio; have benefited (10:00). That’s also affected commercial real estate including office buildings, where properties in suburbs have fared better.
Ultimately, Sharga says younger Americans still aspire to homeownership, which helps support the housing market (12:40). And as we always remind people, it pays to shop around for the best mortgage rate.