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When stay-at-home mandates were enforced last year, many households realized their homes didn’t really fulfill their new lifestyle needs. An office (in some cases two), a media room, space for children to learn, a gym, and a large yard are all examples of amenities that became highly desirable almost overnight.
Zelman & Associates recently reported that sales of primary residences grew by 9% in 2020. That increase in demand was met by the lowest supply of homes for sale in history. High demand and low supply caused prices to skyrocket over the past twelve months. Here are three home price indexes released most recently that show how home values have risen:
- FHFA Agency House Price Index shows a 13.9% increase
- CoreLogic Home Price Insights Report shows an 11.3% increase
- S&P Case-Shiller U.S. National Home Price Index shows a 13.2% increase
Prices increased by double digits in every region of the country and in 19 of 20 major metros. Chicago was the only exception, where prices still rose by 9%.
Many people didn’t want to give up a home in the city or close to their office. Instead, they purchased a larger second home farther away and moved there to stay safe and have more space. According to the same Zelman report, sales for second homes rose an astonishing 27% in 2020.
That large second-home retreat on a lake or in the mountains would demand a higher price than the average house. Let’s assume a buyer purchased such a home for $500,000. Assuming the middle 13.2% appreciation shown above, that home would now be worth about $566,000.
Those who bought second homes to improve their lifestyle during the height of the pandemic, or those who just wanted to be in a safer environment, also made a great investment.
The buyers of those second homes now have a decision to make. Many will move back to the original home they still own (the one that’s closer to work, friends, and family). Should they keep the second home? That could depend on answers to questions like these:
- Now that you may have to go back to the office (at least a few days a week) and students are required to physically attend school, would you still use the second house enough to warrant the expenses of an additional home?
- Would you go to the second home on most weekends, or would you return to the movie theater, attend sporting events, eat out at fine restaurants, or spend your time traveling again?
If you purchased a larger second home during the pandemic, you were able to make day-to-day life much easier for those important to you. You also made it much safer. However, with those goals already accomplished, you now need to decide whether to continue paying the extra expenses or sell the house and cash in your profit. If you decide selling makes sense, let’s connect today to discuss the value of your second home.
I found a great blog the other day. While it isn’t solely
focused on real estate, he does have a section devoted to it. Last month the author was
writing about the Fenway, but in a wider sense, about construction in the city and supply and
demand, overall. I have cut and pasted part of his post, along with a reader’s response, and
my response to that response, below.
“Steve Bailey details the troubles of the
Fenway Community Development Corporation in maintaining its own goals of affordable housing. It
seems that the Susan S. Bailis center on the edge of the South End is trying to convert affordable
units to market-rate, because the overestimation of market demand has led to a fiscal shortfall in
the project. This, Bailey argues, should give pause to the FCD’s recent obstruction of
Northeastern’s attempt to create more student housing in the
This obstructionism is part and parcel with
a mentality that sees luxury high-rise construction as bad because average people can’t afford to
live there. The way I look at it, the more places well-to-do people have to live, the less likely
they’re going to be competing with places I might actually be looking at one day. This is not to
say that the market solves everything; it doesn’t. Nor does it mean that affordable housing
requirements in new construction are a bad thing. It simply points out that creation of new housing
is the thing above all else that’s going to ease the difficulty in the long run of average people
to afford their living space.”
In theory, you’re right. The problem is this is no longer a
rational market, where increased supply inevitably leads to reduced prices. Demand is down (as
indicated by stats showing houses are staying on the market longer) and yet prices continue to go
When two-bedroom condos in rehabbed townhouse apartments in Roslindale
are going for $400,000, when WBZ runs ads for seminars on how to make money in real estate,
there’s something else going on beyond a shortage of units (and is there really one? Back in 1950,
Boston somehow managed to fit 800,000 people in the same basic space now occupied by barely
600,000). Can you say speculation?…
I know this comment is coming a month after your original post,
but I just wanted to take issue with what adamg said. Actually, I don’t really know what he
said…something about 800,000 people in 1950 vs. 600,000 now. I’m not sure you can make that
I don’t know how many housing units there were in 1950, nor do I know
how many there are now, so his comment that in 2005 we are fitting 600,000 people in the “same
basic space” as in 1950 might not be true. The city has changed drastically, since
For one reason, in 1950, two neighborhoods existed that are no longer there –
the “New York Streets” neighborhood (where the Boston Herald is, now) and, of course, the
West End (where Charles River Park is, now). That might mean lower number of housing units exist
today (a fair guess, seeing how dense the West End was and how sparsely populated is Charles River
For another, the majority(?) of housing in the South End, and probably the
Back Bay, too, were rentals and single-resident-occupancy (SRO) units, meaning there was a greater
the density of people (and, in fact, there are regulations now which lower the people per floor…what
is that called, FAR?). There is less housing available to people in those two
There hasn’t been much residential construction (to-own), in fact,
since the 1950s. I can’t think of many projects, at all, except those that started within the past
five years (Ritz, Grandview, Belvedere, Atelier…wait, is that it?). Housing units have gone from
single families, as originally constructed in the 1800s, to apartment buildings and/or SROs, to
condominiums (in the 1980s) and now in some cases back to single
Actually, the number of housing units in the city over time may be a very
important statistic in all of this. It warrants more research.
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