- The Boom America – national home prices up +8% over last year at this time, according to Redfin
- The Gloom America – 7% of active mortgages in forbearance, according to Zillow
- Gloom America – collapse in employment and collapse in rent prices
The 2020 recession caused by the COVID-19 pandemic is playing out differently than the decade-old Great Recession caused by the housing market. During “normal” recessions, like the Great Recession, home prices collapsed and rent prices didn’t. During this pandemic recession, housing prices are up +8% nationwide, according to Redfin, and rent prices have fallen due to the collapse of employment.
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In the Boom America, still employed Millennials who are coming of home-buying age, historically low interest rates, and increasing remote work are driving up home prices by +8% nationwide as former renters in hip districts of expensive cities are moving to more affordable burbs and cities to get more living space. And why not? If you’re able to work remotely, you don’t have to commute to work and you can live where you want.
The only downside to this Boom America is the imbalance of home supply and home demand that is driving up home prices. Jeff Tucker, an economist with Zillow, said, “There’s a tremendous shortage of homes on the market. We see about -29% fewer homes that are actively listed compared to this time last year.”
Along with these -29% fewer homes on the market this year, more than +7% of all active mortgages are now taking advantage of the CARES Act forbearance relief plan.
In the Gloom America, Tucker said, “There’s a huge shortfall in rental demand right now.” The emptying out of apartments and falling rents are happening all over the country, even in New York City and San Francisco where vacancy rates used to be negligible and rent prices were astronomical. Why? Some 30M Americans are currently receiving some form of unemployment insurance benefits.
On top of these 30M Americans receiving unemployment benefits, a record number of 32M American adults, according to Zillow, are living with their parents or grandparents including the 3M influx of young adults who moved back into their family homes during the pandemic.
As Tucker looks at the housing market for two Americas, he sees a “K-shaped” housing market. The top-right part of the K represents the ones buying new homes or the ones who already have them who are seeing their home value increasing. The bottom-right part of the K represents the sky-high unemployment numbers and mounting bankruptcies/closing businesses. These are the Americans who rent, have student loan debt, don’t have retirement savings and who are dependent upon the government for an affordable place to live.
Thanks to Zillow, Redfin, Department of Labor and National Public Radio.