House Buying Is Soaring in 2021, but Is It Only for the Few and Not the Many?
As we move out of the global pandemic, house buying is on the rise. California is a leading example of where the housing market continues to soar this year. Yet, in this state and elsewhere in the U.S., is house buying only for the wealthy? Will the housing market actually make room for more homebuyers? In the end, is it better to rent?
Surging Market and Lack of Affordable Housing
California is also a leading example of the lack of affordable housing. In this state, million-dollar home sales are driving the housing market upward, not across the board sales. Even with the recovery underway, a lack of houses at lower prices continues to be problematic for many hopeful homeowners. Meanwhile, the sale of luxury homes continues to increase. This trend accompanies nationwide built-up demand and migration for high-income families that has resulted in pushing housing rates up. On the flip side, many years of inadequate construction has now constrained available homes to produce a surging housing market that appears to reflect an equally robust buying population, but is actually skewed toward the wealthier segments of the nation.
Buying Trends and Benefits to the Wealthy
Recent real estate data reflects that median home prices increased twenty percent from last year (to around $310,000), with almost half of all homes being sold for more than their list price. Further, many home buyers are paying cash. These points reflect some of the ways in which the wealthy are driving the housing market. On the flip side, as the cost of homes rise, average home seeker incomes are not keeping pace. A report (by Point2, a real estate data company) reflected that home prices were increasing faster than wages in 53 of the U.S.’s 100 biggest cities. The end result is that first-time buyers are not able to keep pace, but those with higher incomes are buying even more expensive homes.
Corrections about Millennials
News reports abound about millennial home buying, which is true, but not the whole truth. While more millennials have become homeowners than any other generation, many millennials also believe that they will never own a home. One recent statistic indicates that eighteen percent of millennials now think they will rent forever, double the rate from the prior year. Further, about sixty percent of millennials who plan to buy a home do not have the funds for a down payment. On top of student loan debt, higher living expenses, and stagnant wages, many, if not most, millennials cannot buy a home. This generational divide also reflects a nationwide trend of a growing gap between rich and poor.
Renting a Better Option?
Over the past year, renting reflects a similar skew, or bias. Whereas rents have been on the rise for lower-range properties, big discounts have been offered for higher-range luxury apartments. In many cities, rents for more expensive housing have decreased—Chicago, for example, had over a seven percent drop. This drop and discount offers to the rich correspond with the above home buying trends in that rental property companies are trying to retain higher-income renters. Other research indicates that rental rates have risen in a number of cities, including San Francisco, Fort Lauderdale, and Austin. Increased demand has also contributed to these increases, and so if you plan to rent, this may be a tough option in 2021.
Then Again, Renting May Work Better for You
The recession from the pandemic helped reduce mortgage rates, with the lowest rates offered in 2020. However, it is may still make more sense to rent. In addition to the above trends, it is still quite expensive to buy a house, especially with continuing economic uncertainty. Also, by renting you can avoid such expenses as property taxes and homeowners’ insurance. Since it is a seller’s market, not only are houses more expensive, you may get caught in a bidding war to buy a home you finally found.
The housing market is up, and house buying is on the rise, but both seem to be driven by those with higher incomes. If you find yourself out of this category and in a place of uncertain income, it’s probably better to rent for now. For more help with housing, you could visit yourhousingsupport.com, which provides articles on housing, renting, and inside tips.
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