A Tale of Two Americas: Mansion Sales and Emergency Housing
There is currently a situation of two Americas. According to an NPR report from October 23, sales of million-dollar mansions have more than doubled since the World Health Organization (WHO) declared COVID-19 a pandemic on March 13. At the same time, a record number of people have sought emergency housing after getting evicted or losing their homes as a result of the many natural disasters that have hit the United States this spring, summer and autumn. Keep reading to learn about the two Americas and how this situation is affecting the health, safety and well-being of its citizens.
Mansion Sales Reach Record Levels
According to NPR, the COVID-19 pandemic is driving a big boom in the housing market. It's highlighting the uneven economic recovery between the rich and the poor. The biggest increase in home sales is at the top of the market. Homes priced at $1 million or more are selling at a 200% higher rate than they did in 2019.
Why Mansion Sales Are Soaring
White-collar people who are working from home and who don't already have a home office want one. If these people are also parents, they want space for their kids' remote schooling. When a person can afford to buy a bigger house with an office or an extra bedroom, they do. The historic low interest rates make buying a home more affordable right now, and those who already have accumulated wealth are taking advantage of the situation.
How Much Home Sales Have Increased in 2020
In September, home sales were up by more than 20% from September 2019. The prices were also up. The median sale price of a home reached a record of $311,800. That's about 13% higher than the median sale price of homes sold in September 2019. The sales of homes priced at $1 million or more doubled in September.
The Double-edged Sword
While it is great news that people who own homes are seeing their equity go up, this isn't good for everyone. Prices are rising too quickly. They're outpacing the median rise in wages. This will result in first-time home buyers being priced out of the market. In a healthy economy, first-time home buyers account for about 35% to 40% of home sales. If this trend continues, the wealth gap could widen. Home ownership builds equity, and those who can't afford to get into it miss out on those financial gains.
What Is Driving the Sales
There are two main factors driving the increase in home sales. The first is low interest rates. The second is the lack of inventory. There are fewer homes on the market. Builders have slowed construction since the Great Recession's housing crash. The COVID-19 pandemic slowed construction even more. The current inventory is just 21 days. An average home inventory is about 50 to 60 days. More homes would be selling if there were more for sale. The limiting factor is the inventory.
Slower Sales of Affordable Homes
Homes priced at $250,000 to $500,000 have seen sales increase by 36% compared to September 2019. Those listed at $500,000 to $750,000 had a 75% increase compared to last September. Houses listed at $100,000 to $250,000 have only seen a 4% sales increase in September 2020 compared to September 2019. One economist who specializes in real estate said he's never seen this happen before. He added that people who have wealth are going all in and buying bigger homes in which to ride out the pandemic. Some are even buying homes in resort communities. He figures this is because Americans aren't currently allowed in most countries around the world because of the high rate of COVID-19 cases.
It's Not All Sunshine and Rainbows
At the same time as home prices and sales are soaring, a record-breaking number of people are seeking housing assistance. In Augusta, GA, city authorities are fielding dozens of calls a day from people who are currently or soon will be homeless. This includes young people, families and senior citizens. Augusta and other cities around the United States have seen a huge increase in evictions since the temporary moratorium was lifted by county courts. When people are evicted, their choices are to find a homeless shelter or live on the street. This is the tale of the two Americas. Homelessness and million-dollar homes are doubling in growth.
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