- The Washington Times - Monday, March 1, 2021

Chicago resident Hayley Westhoff said the COVID-19 pandemic has affected her thinking about where she lives, and she has considered moving to the suburbs and out of her single-family home in the city.

A suburban home with a yard would have been a “total game-changer” for her two little girls, and a garage would allow her husband to get the second car he wants, she said. Housing space has become a higher priority over the past year for Mrs. Westhoff and many other people as coronavirus protocols forced them to stay home.

“That has created an urgency to improve the space, whether it be getting more space or just making that next step,” said Mrs. Westhoff, a real estate agent for Chicago-based company Compass.

“We’re just seeing so much activity in general, whether that’s moving from a two-bedroom to a four-bedroom or moving from a condo to a single-family home, moving from the city to the suburbs or moving out of state,” she said. “There’s so much activity going on, which means that the demand is really high. And when demand is high, it affects home prices in a positive way.

“Everybody just wants to upgrade their space,” Mrs. Westhoff said.

The pandemic is driving Americans to look for new places to live, whether it’s in the suburbs or entirely different states or regions. The high demand is raising housing prices.

U.S. home prices in December climbed at the quickest pace since 2014, a report shows, indicating a trend driven by high demand for homes and low mortgage rates. City dwellers are moving to less-crowded suburbs and rural areas.

The S&P CoreLogic Case-Shiller national home price index reported last week a 10.4% annual gain in December compared with the previous year. The 20-city composite recorded a 10.1% yearly increase in December, the biggest jump since April 2014 and up from the 9.2% gain reported the month prior.

Phoenix reported the largest hike in home prices at 14.4%. Seattle was second, with a 13.6% jump in home prices, and San Diego was third, with a 13% increase. The District of Columbia showed a 10.3% increase in home prices.

Chicago recorded the slowest price gain, with a 7.7% increase. Nineteen of the 20 cities in the index reported higher price increases in the year ending December than the annual gains in November.

“As COVID-related restrictions began to grip the economy in early 2020, their effect on housing prices was unclear. Price growth decelerated in May and June, and then began a steady climb upward, and December’s report continues that acceleration in an emphatic manner,” Craig J. Lazzara, managing director of index investment strategy at S&P Dow Jones Indices, said in a statement.

“These data are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes. This may indicate a secular shift in housing demand, or may simply represent an acceleration of moves that would have taken place over the next several years anyway,” Mr. Lazzara said.

Mrs. Westhoff described Chicago’s housing market as “hot” but the suburban market as “on fire,” with premarket sales and multiple offers from buyers. She said she has heard of suburban homes selling $100,000 or more over the asking price.

U.S. demand for new homes climbed by 4.3% in January, bumping up sales to an adjusted annual rate of 923,000, the Census Bureau said last week. Economists had anticipated 885,000 sales of new homes by the end of December. Sales of new homes were 19.3% higher than January 2020’s estimate of 774,000.

The Northeast was the only region to record a dip in sales, at 13.9%. The steepest increase was in the Midwest, at 12.6%. The West experienced a 6.8% increase in new home sales, while sales in the South climbed by 3%.

“Interestingly enough, even before the pandemic started, Americans were trying to get away from the high cost of living and cold winters of the Northeast region of the country,” said Boróka Bó, a demography and sociology doctoral candidate at University of California, Berkeley.

She said a study from LendingTree shows that Americans were planning on moving out of Delaware, New York, Rhode Island and Massachusetts in 2018 and 2019.

“Pre-pandemic surveys touching on moving intentions, collected by independent moving companies, show the same plans of relocating away from the Northeast,” Ms. Bo said. “This makes sense, as many of the regions they are moving into — here I am thinking of the West and the South — have been actively courting the tech and other industries for relocation from the coasts.”

Nonetheless, Edward Giles, a real estate agent for Georgetown Realty Group in the District, said many people still are looking for housing in the city and don’t want to move to suburbs, but the pandemic is persuading a lot of them to move out of condos and apartments.

“They feel they need to be safer, and how are they going to be safer? ‘I need to have my own detached home,’” Mr. Giles said. “The pandemic has done a little whooping on people’s brains in terms of whether they want to be safer. They want to move. They want to buy a place. They want to be all by themselves, as opposed to cooped up in a condo or an apartment.”

Lawrence Yun, a chief economist for the National Association of Realtors, said the strong run-up in prices and lack of inventory are happening almost everywhere across the country.

“Not enough supply. While at the same time, mortgage rates hit an all-time low in 2020, so it led to a rush of buyers. So many, many buyers, not enough supply; therefore, home prices are getting pushed up at the strongest pace in many years,” Mr. Yun said.

Home prices in Idaho, Utah and Arizona are rising strongly, partly because people from expensive West Coast cities such as San Francisco and Seattle are moving into these intermountain regions, Mr. Yun said.

“There is stronger demand for housing out in more affordable regions of metro areas, meaning the outer-ring suburbs, because many office workers believe that work from home, that flexibility, will be with us even after the vaccine and, hence, they don’t have to live so close to the city,” Mr. Yun said. “Demand for cities still is solid because of low interest rates, but the demand is stronger in more affordable regions of these cities as people are moving farther out.”

William Frey, a demographer for the Brookings Institution, said it is difficult to determine whether the pandemic played a role in driving people out of the Northeast.

“It could be that fewer people are moving into the Northeast, especially immigrants from abroad. This was a period where immigration nationally has gone down,” he said.

The Northeast had the largest population decline in the past decade, losing about 2.5 million people.

Although demand for homes is high, home construction dropped 6% in January, according to the Census Bureau. Construction of single-family homes dropped 12.2%.

Mr. Yun said homebuilding should pick up this year because of demand, which should help level out prices, but the cost of construction has increased. Lumber prices have spiked 180% since last spring, which on average increased the cost of single-family homes by more than $24,000, according to the National Association of Home Builders.

The median sales price of new houses sold in January was $346,400. The average sales price was $408,800, the Census Bureau report shows. The seasonally adjusted estimate of new houses for sale at the end of January was $307,000.

“I think it’s going to be a very active market throughout the year, but I do foresee this calming down quite a bit. I think we’re still experiencing what I like to call the COVID wave of everyone making these big life decisions and making their next upgrade,” Mrs. Westhoff said. “I think we’re still experiencing that, and at some point that is going to subside and we’re going to go back to normalcy, and the market will also go back to normalcy.”

⦁ This article is based in part on wire service reports.

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