Where have all the houses gone?


“I don’t think we’ve seen a housing market like this,” said Jenny Schuetz, a researcher at the Brookings Institution. “And other recessions looked a little different, so it’s hard to know what’s going on.”

In the run-up to the housing collapse, home prices rose much faster than rents, meaning that many homes were selling for prices that homeowners couldn’t bear if they had to rent them. Then after the collapse, home prices fell in some markets as rents rose, and recently foreclosed homeowners entered the rental market.

Today, rents have fallen for reasons largely inseparable from the pandemic. The laid off workers have had to work with family or friends. College students who typically rent close to campus have been home. Some tenants attracted by low interest rates have successfully purchased a home. And the normal influx of new tenants into cities – recent college graduates, immigrants, workers who just got a new job – has slowed during the pandemic.

Recent research by Arpit Gupta at NYU and his colleagues suggests that rents have fallen the most in nearby urban neighborhoods. These are also the places where it simply doesn’t make sense in a pandemic to pay a premium in rent to be close to restaurants, bars, museums, and offices in the city center. This has followed another unusual pattern: Single-family rentals are behaving much more like owner-occupied homes (with strong demand), while condos are more like rentals (with weak appeal).

These unusual circumstances in the rental market make it even more difficult to deal with what is happening on the homeowners side. The relationship between home prices and rents in many metropolitan areas is now as high as it has been since the housing bubble, but it has exploded during the pandemic in part because rents have fallen, not just because prices have fallen. fired.

Moody’s Zandi said he was not yet looking forward to an impending disaster like the latest housing bubble. But he says it is already worrying that rising prices have overtaken many first-time and moderate-income homebuyers, who may lose the benefits of locking interest rates below 3 percent in the coming years.

“I don’t think they are red flares; I think they are yellow flares, ”said Zandi. “But if we have another year like the one we had last year, we are going to have a lot of red flares lit.”

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