Financial Intel Monthly

The Real Estate market has been appreciating dramatically through the pandemic; The Federal Reserve's latest findings show that, within the first three months of this year, net worth for U.S. households rose by $960 billion solely based on the value of real estate owned." CNBC recently reported that "The 10-City composite rose 18.5%, up from 16.6% in the previous month" and "The 20-City composite was up 19.1%, up from 17.1% in the previous month." According to the S&P CoreLogic Case-Shiller Index report, Phoenix, San Diego, and Seattle reported the highest year-over-year gains. This brings back the large concern that we are in another 2007 housing bubble.

The housing market has been on fire recently and many AT&T employees are becoming concerned we may be in the midst of another housing bubble. The Retirement Group has many clients who work for AT&T, and a significant amount of them are considering retiring in 2021 because they can downsize their home and use their increased equity for retirement.

The housing market has been on fire recently and many Americans are becoming concerned we may be in the midst of another housing bubble. The Retirement Group has many clients who work for major corporations like AT&T, ExxonMobil, Chevron & Kaiser Permanente, and a significant amount of them are considering retiring in 2021 because they can downsize their home and use their increased equity for retirement. Oftentimes employees nearing retirement age are especially anxious about the housing market as much of their net worth is tied to the value of their home. There are several benefits to retiring in 2021, especially for AT&T employees. At AT&T they can lock in their healthcare subsidy, capitalize on low interest rates for their lump-sum, and receive great value for their home. However, there is a growing concern that the housing market will take a turn for the worse and homeowners will lose value on their current assets. 

Housing Demand

Housing Demand can be best explained with the two phrases "4 + 4" and “Big is Back.” Sellers are seeing 4 offers in 4 days. According to the California Association of Realtors, homes in California are on the market for about 7 days before starting the closing process, with 70% of homes selling above the listing price. This is the exact opposite of the subprime housing boom. Buyers are leaving the cities and going big with more square footage. According to the 2021 Coldwell Banker Survey, more square footage was the number one amenity buyers wanted in 2021. Purchases of luxury homes in the U.S. surged 88.2% year-over-year in the second quarter, while purchases of the most affordable homes rose by 56.8%. By comparison, purchases of homes in other price tiers increased between 30% and 45%, according to the Ritz Herald. 

Replacement/Reproduction Costs

Replacement/Reproduction Costs rose drastically through the pandemic as government regulation and permit processes increased the cost of land and construction. These costs have recently begun stabilizing. Inflation is hitting wages as builders cannot find enough workers, forcing builders to face increased cost of construction, with input prices 23.1% higher overall than a year ago, per the American Surveyor. Additionally, American builders have grown frustrated, as bottlenecks in material supply chains continue to delay construction projects.