Is real estate going to crash again? Know this before relocating 

The real estate market has never seen a boom like this before. The “Great Resignation,” where millions of workers have left their positions for bluer waters, has brought forth the “Great Relocation” in its wake. 

Over 50 million people have voluntarily quit their jobs since the beginning of 2021, and that means people are moving all over the country to resettle. 

The current market is a dream for the real estate industry, but how long will it last?

For most people, buying a home is the biggest purchase they will make in their lifetime. It should be exciting. But buying a home right now is financially scary, and many are being told to ‘wait for the bubble to burst.’ 

The average new home sale in 2021 was priced at a hefty $453,700, up from $391,900 in 2020. And prices are only going up, though the market is leveling off as interest rates rise.

Sadee Montoya, a real estate agent specializing in first-time buyers, said “...it is a difficult time for first time home buyers to purchase a home because they are getting beat out by cash offers. Sellers are more attracted to cash buyers because they can avoid the risk of waiting for loan approval or an appraisal.”

Some people, though, are able to take advantage of the recent stabilizing of home prices combined with now-common flexible work arrangements offered by employers. Rita Gennato recently made the decision to move to Ohio to be closer to her support system. 

“With my husband’s company also now allowing full-time remote work, and feeling the stress of three kids at home, it’s the perfect time for us to move closer to family. You just can’t pass up free babysitting when both parents are going crazy in a shared home office.”

It's still a great time to sell, no doubt. But…

If you sell, you’re buying into the same high-price market, right? 

Not necessarily, and that’s because neighborhoods across the country have gotten an inadvertent makeover. You may be buying at a higher price for the neighborhood, but homes are increasingly remodeled and upgraded these days. Read on to find out why.

When I asked Gennato how she will buy her next home, she said “we’re moving to a lower priced home that’s even bigger than our current home. We’re banking the profit that we’re getting just from moving to an area with a lower cost of living.”

This relocation from high-cost, high population density cities to lower cost, lower density suburbs makes sense from both a financial perspective, as well as for those worried about the ability to social distance in a potential future pandemic. 

The pandemic changed neighborhoods, surprisingly, for the better

But when city folk moved to the suburbs, what happened next? For the past two years and still now, there is a shortage of homes for sale across the country, and bidding war horror stories are real. Not everyone could get into their ideal spot, so they naturally moved into their second, third, or even fourth choice neighborhood. Then they remodeled and brought the home up to their standard of living. 

Montoya remarked on how sellers’ hesitancy has caused a swath of home improvement projects. “Inventory is still very low which is making it difficult for buyers to find a home. With inventory being so low, it is also making seller's hesitant to sell their home due to the fear of not being able to find another home in return. In my opinion, this is also contributing to seller's deciding to keep their home and upgrade it or add on to make it what they want.”

This is the mechanism that’s sent contractors scheduling projects a year in advance and commodity prices soaring into the double digits. 

Everyone had a “pandemic project,” maybe even you, dear reader. You’ve seen it up close, and it’s a good thing. Now, that second-rate neighborhood is turning into a first-rate neighborhood. That previously fourth-rate neighborhood is now in the running for your next move. 

Yes, home prices are still up. But the real value of the homes has tangibly increased, too.

So when you consider moving, remember that the previous home prices you’re comparing against represent the previous neighborhood makeup of homes. The increase in price is due to inflation but also, at least to some degree, representative of an increase in the actual value of homes and indirectly the neighborhood aesthetics. 

Buyers aren’t being as short-changed as they think.

Is real estate going to crash again? Well, real estate will rise and fall, but the market always favors the long-gamers.

External factors that could cause another crash include (but are not limited to) rising inflation, rising mortgage rates, and the possibility of another pandemic surge. All of these factors point to short term fear mindsets that in the long run will not matter. 

Even if there is a dip, home prices will go up in the long run, just like the stock market.

View home value trends by neighborhood at www.nhscore.com and get matched to your perfect neighborhood and realtor when you fill out the free quiz.

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