The housing market has been a solidly bright spot in the U.S. economy in recent months.
Yes, but: There remain serious questions about what the next phase for the market will be as the coronavirus pandemic has created an enormous amount of uncertainty about where and how people will live.
Driving the news: The National Association of Home Builders reported that confidence among builders jumped to its highest level ever this month, as Americans have rushed to take advantage of record low interest rates
- “The demand for new single-family homes continues to be strong, as low interest rates and a focus on the importance of housing has stoked buyer traffic to all-time highs as measured on the HMI,” NAHB chairman Chuck Fowke said in a statement.
- “However, the V-shaped recovery for housing has produced a staggering increase for lumber prices, which have more than doubled since mid-April. Such cost increases could dampen momentum in the housing market this fall, despite historically low interest rates.”
On the other side: Commercial rents and property values are declining and significant uncertainty hangs over the market.
- The Green Street Commercial Property Price Index has declined by 15 points since February with average prices falling by around 10%, says Peter Rothemund, managing director at Green Street Advisors.
- "[I]t’s pretty clear that the range of outcomes is going to be wide," Rothemund said in a recent blog.
- "Record-low interest rates mean properties with a stable top-line outlook will hold up well. Those with some risk, say multitenant office, probably see something like a 10% hit on average. And those with a lot of hair, like lodging and some retail, lose even more.”
One level deeper: Investment in commercial real estate in the Americas region saw a 70% decline year over year to $43 billion in the second quarter, the lowest since 2010, according to CBRE.
What to watch: While realtors say home buyers are flocking to the suburbs, new surveys from CivicScience find that suburbanites are just as likely as city dwellers to be considering a new residence.
- Ultra-expensive cities like New York and San Francisco are seeing inhabitants depart and rents decline. Economists expect more young people to settle in less expensive cities, but none have yet emerged as the clear destination for the expected work-from-home exodus.
- 32% of respondents said they would move to a different city if offered the opportunity to permanently work remotely, but 30% were unsure and 38% said they would not move.