US Housing Boom: Real Estate Run Creates Risk of New Crisis

As a biology teacher, Joy Douglas isn’t one of the top earners in the US But the 43-year-old has recently become a proud homeowner in Washington. In mid-June, when her school in the northeast of the capital closed for the summer, she saw that it was time to go from tenant to owner.

“That wasn’t something I had on my screen before. A lot of my friends bought. I wanted to travel,” says the African American. But in the crisis of the pandemic, mortgage rates had fallen to a record low and his acquaintances warned him not to miss the opportunity: “If Trump leaves office, interest rates will rise again,” they told him. So he decided to do it before the presidential elections in November.

Four weeks after his decision, Douglas signed the purchase agreement. She and her cat Peaches will soon be moving to the extreme southeast of Washington, where gentrification is still slow. The townhome was advertised for $ 450,000, but in the end you had to put down $ 470,000 to get the offer. “I was hoping not to have much competition in the Covid crisis. That was a mistake.”

Like the first-time buyer, many professionals were surprised by the boom in the real estate market during the deep Corona recession.

In Washington and the surrounding districts, the industry had sales of $ 5.3 billion in July, a 26 percent increase from the previous year. Median price in the metro area rose to a ten-year high, and now a record average of $ 800,000 is being asked for one of the typical Victorian-style townhouses with false gables.

But house hunters aren’t just milling around the capital. Nationwide, new single-family home sales increased 36 percent in July compared to the prior year. Since supply doesn’t keep up with demand, prices go up.

Not only has the real estate industry weathered the pandemic, it is even profiting from some of its consequences, writes investment expert Ed Yardeni: Excess money from the Fed guarantees low interest rates, and many Americans seek more. space to work from home and maintain social distance. can. “All of this has helped the real estate industry perform much better than anyone could imagine.”

In the San Bernardino district of California, a line of buyers recently formed the day before an entirely new project went up for sale. Equipped with a respirator and an umbrella, those interested approached temperatures of 40 degrees to seize one of the 40 plots of the “ShadeTree” settlement.

Firefighter Jason Alonzo also spent the night in a lawn chair in front of the sales office. As a former soldier, he learned to be able to sleep anywhere, the 34-year-old told the Bloomberg news agency, and from his point of view, this effort paid off: The next morning, Alonzo signed the agreement to purchase a $ 680,000 house on the project in Ontario. 70 kilometers from Los Angeles.

The rediscovery of suburban hell, previously vilified by young people, comes at the expense of former dream metropolises: According to real estate portal Zillow, the inventory of properties for sale in San Francisco was almost 100 percent higher than the previous year earlier. August, compared with a national decrease of 25 percent.

And Manhattan’s wealthy clientele is also looking for a new home in neighboring New Jersey. “The people of New York come with a sense of urgency, and what they want is space,” local agent James Hughes told the New York Times: “The demand is insane.” Locals report that real estate agents ring their doorbells urging them to sell their home. However, according to the August Zillow survey, urban flights have so far been limited to the two most expensive metropolises in the United States.

The US real estate market has become a “locomotive of economic recovery,” says consultancy BCA Research. Because not only the construction industry generates income. Sofa, refrigerator, and pool vendor manufacturers participate when newcomers furnish their new home.

The millennial generation, who have long been considered reluctant to settle at home, now seem to be part of the party. About a third of home sales in July were made by first-time buyers.

Yardeni suspects that some couples use the money saved for the down payment for the wedding celebration, which had to be canceled due to Corona. Such an event usually devours an average of about $ 40,000. Including the ring, but not including the honeymoon.

Joy Douglas and firefighter Alonzo, however, didn’t need any equity. The state generously encourages home ownership. She received $ 36,000 from various boats, says the teacher. She says she can handle the future burden of $ 2,300 a month. A budget was set. You don’t want to risk becoming a “poor householder,” someone whose household burden is so high that you no longer have room for unforeseen expenses.