Bubble watch: Pandemic made housing’s rich only richer

“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.

Buzz: The housing market’s buying binge has largely inflated prices in what were already some of the nation’s most-expensive metropolitan areas.

Source: My trusty spreadsheet’s analysis of data from the National Association of Realtors of third-quarter median selling prices for existing, single-family homes for 182 metropolitan areas — looking at the latest median prices and how they’ve changed from two years ago.

The Trend

Despite much chatter about a supposed exodus of residents from big, expensive housing markets in the pandemic era, metro areas ranked in the top 20% of all selling prices had a median two-year price gain of 34% — better than a 26% median gain for the rest of the nation.

The Dissection

You see another example of how the rich got richer in the pandemic era when the nation’s housing markets are sliced into five groups based on pricing — with a handful of exceptions …

Upper Crust: The priciest fifth had a $548,350 median, up from $408,550 two years earlier — a gain of 34%, the largest increase of these five slices. Price jumps ranged from 25% (Washington, DC) to 59% (Boise, Idaho). In this group, 92% of the price gains topped the 28% gain seen across all 182 metro areas. No slice had a bigger share of above-par increases.

Next priciest: Next came a fifth of the nation with a $361,000 median — up from $276,350 two years earlier. That’s a gain of 31% that ranged from 18% (Baltimore) to 45% (Spokane). This group had 67% of its metros above the median gain.

Mid-range: The middle of the pack had a $282,650 median, up from $224,750 two years earlier. That 26% gain ranged from 11% (Bismarck, N.D.) to 39% (Atlantic City, N.J.) This group had 45% of its metros beating the U.S. pace.

Next cheapest: This slice’s $232,400 median was up from $185,250 two years earlier. That 25% gain ranged from 16% (Abilene, Texas) to 38% (Ocala, Fla.) This group had 36% of its metros beating the U.S. pace.

Cheapest: The nation’s “bargains” had a $183,550 median, up from $150,300 two years earlier. That 22% gain ranged from 5% (Shreveport, La.) to 36% (Cumberland, Md.) This group had only 11% of its metros beating the U.S. pace.

Note the price gap, top 20% to bottom 20%, grew to $364,800 from $258,250 — a 41% jump!

Another view

All eight California markets in this list topped the 28% all-metro median gain.

San Francisco had the largest jump (up 40% to $1.35 million); then the Inland Empire (up 38% to $524,000); Orange County (up 33% to $1.1 million); San Jose (up 33% to $1.65 million); Los Angeles (up 33% to $860,900); Sacramento (up 32% to $512,000); San Diego (up 32% to $850,000); and Fresno (up 31% to $375,000).

Florida had 16 of its 19 metros with above-par price increases. But just one of 11 Texas metros beat the U.S. pace — Austin, up 51%, the nation’s third-biggest jump.

By the way, 44% of the rest of the metros had gains topping 28%.

How bubbly?

On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … FIVE BUBBLES!

Just another example of how misguided is the nation’s housing bailout for the coronavirus-chilled economy.

Most of the nation’s priciest metro areas have long been expensive because they’re home to an oversized number of high-paying office jobs. That type of work easily morphed into the pandemic’s key employment niche — remote jobs. These paychecks were relatively steady in an otherwise erratic pandemic economy.

Add in cheap money as a key financial tool deployed to keep housing afloat. That started almost immediately when coronavirus iced the economy in spring 2020 and still exists today.

But this price-gain analysis suggests the greatest appreciation came in places where folks didn’t badly need that kind of financial help. Being an owner in the nation’s costliest regions has forever required a household with one or more secure, good-paying careers and significant savings for downpayments.

So these home seekers used the low rates to help super-heat prices in many already expensive markets.

Meanwhile, low-cost metros saw meager home appreciation. Many of these economies are more blue-collar oriented or tourism-dependent — not work-from-home friendly. Thus, greater job losses and economic pain.

And these modest price increases also suggest that any perceived rush to cheaper housing by people with the pandemic era’s work-from-anywhere freedoms was, at best, less than envisioned.

But let me suggest one positive for the low-price communities; their housing’s nowhere as frothy as their higher-priced neighbors.

Jonathan Lansner is business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

from Boston Herald https://ift.tt/3D72VgT