What in the world happened in 2020? And WHY?

If you’ve been watching the stats this year on our blog and Facebook page, you’ve seen some amazing numbers Austin has been putting up. Who would have thought this would have happened, when we were in full panic mode in March! If you bought your home this time last year, your home could easily be worth around 15% more now. WHY did this happen during a pandemic?! It just doesn’t compute with a lot of us. Here’s a little commentary on what happened:

1. Increased Value: Our whole value system has changed. Our home became so much more than it was before. Besides our quarantine space, it also became our office, our schoolhouse, our childcare space, our leisure space, our vacation space… When a product increases the functions it provides to us, it thus also increases its value. When an asset’s value increases, the demand increases. Economics 101 tells us that just about everything comes down to supply and demand. Because of increased perceived value, demand for a great house also increased greatly!

2. Demand Increase: Besides real estate’s increasing perceived value as people have had the itch to improve their abode, another reason is that this year has produced a lot of buyers out of people that were previously renters. Low interest rates / cheap money have helped make that possible. What’s more, although it seems counterintuitive, the economic downturn hasn’t affected everyone evenly. There are some studies that even suggest that the middle and upper middle class have done BETTER this year, and accrued more disposable income than they had last year. Stimulus checks and decreased recreational expenses have simply put more money in many of our pockets. Some of us have seen substantial stock value increases as well. All this rolls into more money that they may have used to put into their new favorite asset- their home.

3. Supply decrease: At the same time demand was increasing, supply was also decreasing. About 6 months of inventory is near equilibrium. More than that amount is a buyer’s market, and less is a seller’s market. This year has pushed us backwards toward about 1 month of inventory now, MORE towards a seller’s market. Well why did THIS happen? A lot of the people that would have normally been selling their home didn’t move their inventory, and are waiting until after the pandemic to make the move.

4. Urban Exodus: People have been more highly motivated to get out of dense urban areas because of obvious reasons related to the pandemic. There has been a bigger push toward the suburbs, and compared to places like New York and California, even areas closer to downtown Austin don’t seem that urban.

5. Government Overreach: Without giving any political opinions here, and whatever your own opinion, perception is reality. Many people PERCEIVE that government has interfered too much on their lives. This perception has driven many to places with smaller, less invasive government. Many perceive Texas to be the perfect place by comparison to where they left. They also perceive the place they left to be less friendly to business and fear the future business outlook there. Texas means greener pastures.

6. Austin Being Austin: Although the real estate market in much of America is doing well, Austin is among the best performers. In my opinion, this is mainly because of two things: A) it’s a pleasant place with high quality of life, and B) the job growth here just seems to be unending. Second to Silicon Valley (and maybe Seattle), Austin is THE place to be for IT. What sector of the economy is more foundational and stable at this point in our history than IT? It’s the gilded age for IT it seems, and seems more immune to downturn than any other sector. It’s a good foundation for a local economy as well. Apple is bringing 5000 jobs, Tesla bringing another 5000 jobs, and the list goes on and on. These people need houses, and Austin can’t build them fast enough.

For all these reasons, I see 2021 prospects to be very bright. The months of inventory will be low for a long time to come, and as long as it’s such a seller’s market, robust appreciation will continue. I have every expectation for your home investment to do very well next year.