Why are Property Prices not Falling in this Crisis?
Let’s do a review about everything that has been going on in the property prices market. We are living through a hard crisis that has beaten our pockets and what we all need to do is to educate ourselves in order to have more clarity about what to do and what not to do.
Basically, what we want to do in this opportunity is to draw a very clear distinction just to help you visualize everything that’s going on. The prices of the properties are going up and going down at the same time. It depends on the neighborhood, the state’s legislation towards the virus and the new restrictions.
Why are certain prices going up in certain neighborhoods? It all has to do with the new flexibility of working from home. This actually derived from the pandemic.
For example, those who actually work in retail, those who actually work in hospitality, or any of the restaurant business because their presence was actually required and because of the business closure due to the pandemic, a lot of those were actually sent from home and hope for the pandemic restrictions to be lifted.
However, there are some other companies who were able to stay open, and instead of having their staff coming home, they were actually given the opportunity to work from home.
People have started to ask themselves, “What’s the main reason why I will normally want to live in an expensive city like Los Angeles or New York City?” The reason is proximity to work.
You want to be relatively close to work, where you get to commute hopefully less than an hour-long so that you don’t have to wake up so early or that you have more time to do the stuff that you like. Activities like exercising in the morning or meditating or even getting your kids ready for school.
Work from home, a reason why property prices are not falling
People in major cities, during this crisis, don’t have to worry about commuting because they have the chance to work from home.
Working from home got accelerated, a lot of the companies had to come up to speed. They had to put the processes. It was a painful growing process, but they managed to make it happen.
Now people are thinking, “Why would I want to pay $3,000 worth of rent when I can take that money and rent a bigger place, a much cheaper place at perhaps $2,000 or $1,500 out in the suburbs where my kids get to step out of the house?” We’re still in quarantine in some states, but at least they would get to breathe some fresh air and we don’t have to worry about being so close to one another.
Another reason why people are considering moving outside of the city to a much cheaper place, it’s also due to the fact that we have a lot of people in big cities, so they’re trying to keep their families protected.
At the same time with everything that’s been going on with the riots in the past months, that’s another reason as to why they will prefer to move into an area where there are no protests. A lot of people want to keep their quiet lifestyle so they can continue to focus on their education even though it’s at home and via Zoom.
Prices going up in suburban areas
On the opposite side, you might see that because prices are going up in suburban areas, now you see a drop in prices in the metropolitan area, and for that, we’re talking NYC, we are referring to Boston, cities like LA. The more populated the city, the higher chances you have of getting exposed to the virus.
The pandemic has changed the real estate market, and houses that were previously cheaper, today can be priced higher
Parents, for the most part, they are trying to prevent this from happening. Because of this particular reason, there are places where you will typically expect housing prices to go down, and what you see is the complete opposite.
For example, there are a lot of people who have migrated from New York City, all the way to Connecticut where they can afford a place that is much bigger and cheaper at the same time. They’re somewhat relatively close to the city in case they need to hop back, but eventually, they don’t need to deal with that long commute anymore because of that flexibility.
Some of us are afraid of stepping out, some of us are afraid of losing our jobs, some people are still managing to buy properties. Why? Because if you have the opportunity to work from home and you are well aware that your role is critical to your company, chances are you will remain employed.
The lower the supply, the higher the demand. That means the prices will continue to go up or definitely not go down.
Property prices: Everything is virtual
Our children are working from home, so you’re maximizing your time more often than before. There’s only a certain amount of books, there’s only a certain amount of Netflix that can actually keep you occupied, so people, in essence, they started to look for properties.
They can look up properties online by just taking virtual tours and basically maximizing your time in every way possible because now you don’t have to travel to that particular property to “check it out.” Why? Because you don’t want to expose yourself to a virus and at the same time, you just don’t feel safe anymore.
The market is constantly changing, and perhaps this is a good time to invest, before a general increase of property prices
People are going to the new construction areas. They are changing their lifestyle so they can protect themselves and their families. They stay at home and they want to have activities to do during the day. They want to feel protected.
People are taking a look at new construction houses and thinking that if they are not going to be able to move in anytime soon, they will not have any problem with that because we’re in the middle of a pandemic and we have been told to stay home. Some of them are investing their money buying a property that they know is not ready for them to move in yet, but they have no intentions of moving out anytime soon because of everything that’s going on.
We’re still relatively early in the new changes of the market, as they change every week or month. It is very difficult to predict what’s going to happen long-term, but in the short-term, within 9 to 12 months because of this new trend of working from home, this is one of the many explanations that can explain why in certain places the property prices are going up, they’re not going down at all and why in some other places, like for example, in New York City, you’re starting to see a decline in some of the property prices.
People have reorganized their priorities and they are changing their traditional lifestyle for another that is more efficient and allows them to take advantage of working from home.
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