Understanding the disparity in the 2021 housing market
By now, everyone knows that living in New York City is expensive. We have all watched “Friends” and thought how ridiculous it is that the main cast could afford the large, swanky apartment that they had. Strangely enough, because of the COVID-19 pandemic, living in New York City has become more affordable than it has in a long time.
COVID-19 and the disparity in the housing market in 2021
Throughout the pandemic, the values of homes in the 100 largest metropolitan areas have increased. This is not puzzling in and of itself, but rather what is puzzling is that the rent prices are falling significantly in some of the richest cities in America, such as New York City, San Francisco, Austin and Seattle.
Normally, when home values increase, rent increases along with it. So why are we seeing the value of homes increase now but rent is going down? It likely has much to do with the way COVID-19 has changed our lives.
Why there is a disparity in the housing market
In the last year, many middle-class and high-income families took advantage of low mortgage rates to buy their first and second homes. Many moved out of the urban areas, especially because they no longer have to come into the office. Their new homes have rooms that can be converted into office spaces instead (which, for many employees, can be a tax write-off).
Meanwhile, young professionals and college graduates have been moving out of the cities to work remotely from lower-cost rentals in more affordable areas. Because housing in urban areas has largely been abandoned by both the higher-earning families and the younger startups, the demand for real estate in cities is lower; thus, the costs are lowered in hopes of luring residents back.
Talk to a ProVise CFP® professional about the housing market and your financial plan
The cost of owning or renting a home represents a significant portion of your budget and your financial plan. If you are planning on making changes to your housing situation, you should readjust your entire financial strategy to make sure it fits. This can be challenging, but with a professional financial planner by your side, you can build a plan that works for you.
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about the housing market in 2021 and how it factors into your financial plan? Contact ProVise today to schedule a complimentary consultation.