This April, the S&P Case-Shiller National Home Price Index posted the biggest annual percentage increase in 30 years of 16.6%. Housing prices have risen for 12 straight months, with the advances accelerating in all the index’s 20 cities.
Craig Lazzara, global head of index-investment strategy at S&P Dow Jones Indices said, “A Month ago, I described April’s performance as truly extraordinary, and this month I find myself running out of superlatives. Homes are flying off the shelves.”
The median existing-home price for all housing types in June hit the highest level ever recorded of $363,300. The market is witnessing multiple bids, price escalation clauses and contingency waivers. Realtors highlight three important trends fueling a buying frenzy: (1) low mortgage rates, (2) historically low inventory and (3) business reopening’s. Fortunately, the drop in mortgage rates has offset much of the burden of the increase in housing prices. In addition, most households received stimulus checks and pulled back spending on items such as travel, eating out, and gyms during the pandemic.
Escalating home prices are testing affordability for the average American. Experts use a rule of thumb that the maximum a family should pay for housing is 30% of their income.
Peter Taylor wrote in Forbes, “America’s Housing Market is Officially Over-Heating Everywhere. How Long will it last?” In his article, Taylor noted that besides the speed of home sales, and high prices, “the contractual absurdities such as waiving all contingencies as panicked buyers over-reach to get in on the action before the current boom decelerates.”
Taylor highlighted some other factors that do not make the headlines but are pushing up prices. Specifically, he focused on technological developments that have increased the pace of and contributed to the demand/supply imbalance such as (1) online housing platforms, (2) digital mortgage approvals, and (3) virtual closings.
Tim Mitten, GRI certified agent for Wagner Realty, identified selling points of Sarasota. He said, “Covid created a tipping point where people throughout the United States that had closed down chose to accelerate their move to Florida because our state’s Covid’s rules were less stringent, our warm weather, our home prices are relatively cheaper, and we have no state income taxes.”
We are particularly fortunate that one local home builder, Marshall Gobuty, CEO and Founder of Pearl Homes, is committed to building homes that mitigate the global climate challenges. Environment and Energy Leader selected Gobuty as their 2020 winner. They cited his outstanding design and construction efforts at his 160 Leed Platinum Mirabella Gated Community in West Bradenton, FL.
Over the past four years, Pearl Homes has received 18 national awards in recognition for providing the highest quality, most energy-efficient, and environmentally responsible homes.
In my interview with Gobuty, he reiterated his commitment to the environment and dedication to providing homeowners with a home that is energy efficient and has NetZero carbon emissions.
Gobuty said, “the MET (his upcoming 200-unit green apartment community) is the very first LEED certified work force housing project in the country.” The MET will offer rental units at reasonable prices so workers in our area can afford to live locally.
Jonathon Gray, President of Blackstone, the world’s largest real estate company, anticipates further increases in home prices. He noted that America needs to build 1,500,000 new units to meet our demographic demands. In recent years we have built on average 1,200,000 units.
Gray noted that a biproduct of people working at home encourages enlarging their home-work space and, therefore, their residences.
Homeownership is still a cornerstone of the American Dream. I remember the wonderful quote in the kitchen of my childhood home,
“Of all the roads East and West, The road to home is always best.”
Originally published in the Sarasota Herald-Tribune
