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 can be best explained with the two phrases "4 + 4" and “big is back”. Sellers are seeing 4 offers in 4 days. According to real-estate provider Showing Time, there were 10 home showings on average per active listing in 129 markets in March by high credit score borrowers, with sizable down payments. 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. Demand for homes over 5,000 square feet jumped 17% nationally.
The real estate market has been appreciating through the pandemic and homeowners became $2 trillion richer in the first three months of 2021. When drilling down to the largest metropolitan areas in the country, the 10-city composite home prices in May increased 16.4% year over year, from 14.5% the previous month according to the S&P CoreLogic Case-Shiller Index(See Figure 1a). Phoenix, San Diego and Seattle reported the highest year-over-year gains This brings back the big concern that we are in another 2007 housing bubble.
Replacement/Reproduction Costs are rising as government regulation and permit processes make it more expensive buying land and more expensive to build. Inflation is hitting wages as builders cannot find enough workers, forcing builders to now pay 40% more than in 2019.
