
US homebuilding surges as coronavirus sparks flight to suburbs, rural areas - pseudolus
https://www.reuters.com/article/us-usa-economy/u-s-homebuilding-surges-as-coronavirus-crisis-sparks-flight-to-suburbs-rural-areas-idUSKCN24I1OY
======
WrongThinkerNo5
This strikes me as a kind of leading or promotional/industry/PR wire story.
This whole virus thing has only really been a thing for, what, about 4-5
months in total? None of the developers would have been able to find land,
make deals, develop projects, get permits done under the lockdown, solve the
staffing problems under this situation, and get new projects going that
weren't already in the pipeline.

Please do correct me if I'm wrong. But also; so people are leaving the cities
where they appear to have careers/work/friends and are heading to the suburbs
during lockdown because of the virus situation, while businesses are laying
off and contracting/shrinking/making losses and are going out of business?

I know several people who have moved out of cities over the last several years
actually for various reasons, mostly the accumulating cost and declining
benefits, especially with the consequences of political and government
policies starting to impact communities along with the overall cost of living
increases. This is not a coronavirus trend, even if that has only accelerated
things.

What this likely is, is an industry PR story to place the thought into
people's minds to move to the suburbs to, with slight panic, hope they can
find buyers for all the buildings they were committed to build even before
this whole situation. It's the same old developer industry super-cycle; push
and pull, ebb and flow of urban and suburban development cycles, only
exacerbated by poor material and low skill construction meant to last for one
cycle.

~~~
room505
I'm in the architecture field. We work on single family, multifamily,
clubhouses and student housing on a national scale with some of the largest
builders in the USA. I can tell you that we are very busy with current and new
projects in the pipeline. I can't explain what people are doing, this is just
to give perspective from the architectural point of view.

I just spoke with a coworker who used to live in Chicago and moved to the
suburbs. He said that homes in his neighborhood have been selling quickly and
prices are increasing exponentially. The condo in the city he sold in February
is the last to sell. Six are on the market.

~~~
coding123
Just a second anecdata point. I was looking for a plot of land for the past
few years. I'm not going to say where, but let me just summarize that I have
been monitoring pretty much all the areas I've travelled (roughly 1/6 of the
US) to just in case something nice popped up. The available land options have
quite astonishingly disappeared starting in February. The ones that remain are
bad ones (next to trains or under an airport landing) and even those have
prices going up. In some areas there is literally nothing left, and when one
does pop into the market, the price is about DOUBLE what it was a year ago.

I don't have like any analytics on this, but I'm sure Zillow could easily
produce something.

Also just in case people are wondering, for land with a house, I see a trend
where the listings are marked up about 100k more than it was a year ago. The
actual sales price of those listings isn't kinda available yet for much of the
pandemic (since that data lags behind the when it drops off the market a few
months). But a year ago if you saw a house at 200k it will sell at 200k. 300k
will sell at 250, 400 will sell at 320, 500 will sell at 400, 600 will sell
450ish (you get the idea). I have the feeling that the speed at which 500k
rural homes are selling that they are going for very close to asking now.

~~~
lotsofpulp
> But a year ago if you saw a house at 200k it will sell at 200k. 300k will
> sell at 250, 400 will sell at 320, 500 will sell at 400, 600 will sell
> 450ish (you get the idea)

I have not seen this in suburbs of cities in the Rocky Mountains or West
coast. If anything, the houses would sell for more than list price for
anything in the $500k to $1M range.

~~~
jjeaff
In Southern California, I'm seeing prices remain about the same and just
recently start to fall a bit.

A lot of people are taking property off the market right now rather than drop
the price severely.

I'm sure there are exceptions, but I don't think that many people are buying
houses right now. Most people are in a wait and see mode.

~~~
coding123
Is that in an urban setting or rural? I'm seeing the change in rural.

~~~
jjeaff
suburb

------
chadash
There are definitely markets that are doing well and will continue to do so
for a while. Rural housing for sure. This will probably cause a push for some
people to move out of the city and into the burbs.

BUT, it's really too early to know what effects this is going to have on the
housing market. Right now, most unemployed people are getting fairly generous
unemployment benefits. Meanwhile, in many states, you aren't allowed to
foreclose right now.

Once the foreclosure moratoriums and unemployment benefits end, it's anyone's
guess what's going to happen to housing.

Edit: my uncle is a contractor who builds multi-family residences. I remember
he stopped building and moved to house remodeling when there was a building
boom in 2006-2008, when he felt that his local market was being overbuilt
(turned out to be a great decision in retrospect). Houses being built does
_not_ always mean a strong housing market. Plenty of home builders are short
sighted.

~~~
MattGaiser
How many of the unemployed are wealthy enough to own though?

Canada is facing surging real estate prices and while there are also masses of
unemployed, few of those people had the money for home ownership anyway.

~~~
cwhiz
In Oklahoma right now you can be unemployed and earning $58,240 in annualized
unemployment pay. That number will drop to $27,040 (still annualized) at the
end of July unless the Congress intervenes. However, even $27k in Oklahoma
would be enough to afford a small house in the suburbs of a city.

~~~
rosseloh
>However, even $27k in Oklahoma would be enough to afford a small house in the
suburbs of a city.

Sounds like I need to move to Oklahoma... I'm making about $44k in rural South
Dakota but with the way housing prices have been around here the last few
years, I am nowhere near being able to comfortably afford a mortgage (I _can_
afford one, for a cheap, old, needs-a-lot-of-TLC-or-30-miles-out-of-town
house, but not while also affording much else).

~~~
cwhiz
I have friends who live there and go on and on about the cheap cost of living.
I’ve visited and it wasn’t a place I wanted to live. To each their own. It
does seem absurdly cheap.

------
kyrra
WSJ has been writing about this a while during COVID[0]. Their take seems to
be that people don't want to move, so they aren't putting their houses up for
sale. This means decreased supply of existing houses. So reduced supply plus
really low interest rates have led to increasing housing prices. This probably
helps motivate builders to get more houses built.

Then you have the added fact that COVID has made your home the place where you
spend all your time. As I've seen my California co-workers joke about, they
spent a bunch of money on an apartment right near work so their commute would
be short, but it's a tiny apartment. This is now biting them, which is why
lots of people are going elsewhere during this time. It's also leading to rent
prices dropping across the country (as those high-price apartments near
job/downtown/important spots don't matter as much.

[0] [https://www.wsj.com/articles/why-home-prices-are-rising-
duri...](https://www.wsj.com/articles/why-home-prices-are-rising-during-the-
pandemic-11588671002)

~~~
brownbat
Great point.

I've been wondering -- if commute times suddenly become close to irrelevant,
because most hours worked are remote, that changes a ton of housing
calculations, right?

Remote work is over-represented in tech though, so I don't know how much of
the population it will really effect, since we're primarily a services
economy.

Not sure what the effect size is, but if I could easily live anywhere it'd
probably be more remote.

~~~
ghaff
Sure. There are advantages to being within range of a major city for the
occasional day/evening trip or weekend: eating out, airport, theater, health
care, etc.

That said, some of those things are less of a big deal for some people than
others and stretching the distance to, say, a 2 hour drive increases the area
that you could potentially live in enormously if you don't need to worry about
a commute. (And for a rare visit to an office, you can just stay at a hotel if
you're normally remote.)

Of course, for some, there are advantages to living somewhere that is truly
remote.

------
api
If there's a silver lining to this pandemic, it will be an end to the 20+ year
trend of "you have to be in one of 10 cities to have a real career."

This is terrible for the majority of the country. It leads to brain drain and
IMHO is a major force in political hyper-polarization.

It's _also_ terrible for those 10 cities, as it leads to real estate
hyperinflation in those areas that makes housing unaffordable. People who
aren't "white collar" can barely afford to live at all, and even people who
make comfortable six figure salaries must strain to get into housing and it
negatively impacts their ability to build wealth.

In short it leads to: no jobs, unaffordable housing, pick one.

The reversal of this trend would be a win/win for everyone.

I've also seen the negative aspects of "new urbanism." To those who don't see
it yet, I'll leave this here:

[https://en.wikipedia.org/wiki/Law_of_rent](https://en.wikipedia.org/wiki/Law_of_rent)

In short: urbanism tends to enrich present day property owners and can worsen
wealth distribution. If people can't own property they are at the mercy of the
law of rent and are shut out of the primary mechanism for middle class wealth
accumulation.

As far as the environment goes, 20 years ago we did not have affordable high
performing good range EVs on the market. Now we do. The suburbs could be fully
electrified, and suburban roofs are good enough to supply a minimum of 50% of
the power required (and often more) for a typical suburban home.

Land use is IMHO only a concern in very dense countries and regions. The USA
could experience a quadrupling of the size of its suburbs and still only a
small percentage of land would be used for this. The vast majority of land
(and water etc.) use is farming, and urban/suburban settlement patterns have
no effect at all on how much farm land is needed. If anything urbanism may
slightly increase farm land requirements as it encourages people to eat at
restaurants rather than cook food at home. The restaurant system is incredibly
wasteful of food, while eating at home tends to encourage less food waste.

------
jl2718
Living density doesn’t really matter. The virus spreads in indoor common areas
like supermarkets, bars, restaurants, etc. These are just as dense in rural
areas, maybe more due to lack of delivery.

~~~
clairity
folks are erroneously using _density_ as a proxy for the primary transmission
vector, which is prolonged, varied, and direct exposure to others' respiratory
exhaust (understandable, but still erroneous). that happens primarily face-to-
face, in close proximity, for many continuous minutes, not walking around a
grocery store or sitting in a restaurant.

bars/clubs are different because they're primarily spaces for guard-lowering
behaviors (drinking, dancing, etc.), which also lowers risk mitigation
practices against infection.

this misperception of risk is what leads us to poorly placed faith in
lockdowns, rather than the more sensible "distance, and when you can't mask"
rule that has (nearly) all the benefits and (nearly) none of the massive
downsides.

~~~
zip1234
[https://ourworldindata.org/grapher/covid-19-death-rate-vs-
po...](https://ourworldindata.org/grapher/covid-19-death-rate-vs-population-
density?xScale=linear&yScale=linear) You are right. Population density appears
to not really matter. Mask wearing and distancing appear to matter much much
more.

~~~
clairity
thanks for the data support. it's really about getting people to take sensible
precautions (by making them easy and reasonable), not going overboard and
inducing a backlash due to disregarding relevant issues and consequences.

------
nsl73
Is this propaganda to help relax the home owning population?

If the jobless rate and GDP continue to suffer I can’t see this being anything
but bad for rural and suburban real estate.

~~~
NDizzle
We’ve had riots, inaction by mayors, and ridiculous decisions by leaders in
large metro areas for the past month. Nobody in their right mind is staying in
cities, especially after the insane selective application of laws and
ordinances the last 5-6 weeks.

Who would buy a nice place in, for example, St. Louis right now?!

~~~
throwaway0a5e
>We’ve had riots

>Who would buy a nice place in, oh, for example St. Louis, right now?!

People who want to live there regardless and see an opportunity to spend less
money doing so. They're the same people who buy real-estate on the cheap after
it's value has been depressed by a "fresh in people's minds" disaster in any
other location.

Live in a city. Deal with city problems. If you want to live in Nebraska don't
be surprised if a tornado flattens your property. If you want to live in
Florida don't be surprised if it's underwater. Having rioters burn your home
to the ground is simply the mode of destruction you accept some risk of by
living in a city.

Personally I'd rather deal with nature trying to destroy my stuff rather than
people trying to destroy my stuff but I can understand why people want to live
in the city.

~~~
unethical_ban
We shouldn't legitimize the mindset the parent is pushing, that riots have
swept the nation.

Protests swept the nation. Many cities had increased vandalism. A small number
had anything approaching riots.

I am renting a house very near the city center. Were it not for the home
prices, I would love to own here... though another poster made a good point.
All the good reasons to live in the city (night life, people watching,
proximity to friends and services and hobbies) are closed down. At least I can
walk to the grocery store.

~~~
rootusrootus
> Many cities had increased vandalism

You say that like it's a past event. Portland is still seeing riot activity.
They have done a fair amount of damage downtown. I feel sad for the peaceful
BLM protestors because much of the general public will not draw a distinction,
so this kind of behavior will blunt their message.

------
francisofascii
Anecdotally this is happening. Lumber at Home Depot is scarce. I know people
leaving Bay Area, Philly, and Richmond. In the case of Richmond, the protests
contributed. I get the sense that many of the families leaving were planning
to leave eventually in the next few years anyway. In America, it is very
common for couples to start in cities, and then move out before child 1 goes
to school. This situation is accelerating that process.

~~~
duxup
" Lumber at Home Depot is scarce."

I suspect that's more ... home projects with folks stuck at home / out of
work.

------
VikingCoder
30% of Americans missed their housing payments in June. [1]

Why the hell would you build a new house, when an unprecedented, enormous
number of homes are in danger of foreclosure?

[1] [https://www.cnbc.com/2020/06/16/30percent-of-americans-
misse...](https://www.cnbc.com/2020/06/16/30percent-of-americans-missed-their-
housing-payments-in-june.html)

~~~
BeetleB
Your question/comment is very confusing.

The people buying houses are not the same as the ones who missed their
payments.

The people building houses are not connected with those who are missing
payments.

~~~
atian
Your response is also very confusing.

Foreclosed homes usually go on the market for a steep discount. Additionally
widespread foreclosures would depress house pricing in general. The market
will gradually price in reduced rent-seeking ability.

For a buyer, it may be a good option to wait a relatively short period for
prices to depress rather than build a new home at this time.

Edit: Mentioned reduced landlord rent-seeking ability in response to
@sombremesa’s question if rental properties would affect pricing.

~~~
BeetleB
> Foreclosed homes usually go on the market for a steep discount.

This may be market dependent. When I was buying a house, foreclosed homes were
usually not any cheaper.

> For a buyer, it may be a good option to wait a relatively short period for
> prices to depress rather than build a new home at this time.

I think the general gist is that suburban houses are in demand _now_ , and
prices are not dropping. Some may hope that they will drop in the future for
reasons you are pointing out, but it's a gamble that depends on the timeline
of building a house and how long coronavirus is around vs how long it will
take for prices to come down.

------
sjg007
Jokes on us.. My rural area has had a covid spike b/c people refuse to wear
masks or social distance.

------
jb775
This is wrong in two major aspects: 1) The current real estate surge isn't
related to coronavirus itself, it's related to pent up demand caused by
coronavirus lockdowns. 2) People aren't moving to suburbs because they're
afraid of corona within major cities, it's because millennials are over their
inner city lifestyles while at the same time don't feel safe walking down the
street. Survival instincts are kicking in.

------
mikeg8
I live in a rural area on 3 acres, 1 hour north of SF. Last year, a couple,
mid 30s, from the city, bought a house on our street to live out the "Country
Dream". Their new country house was back on the market within 12 months. Many
people who have never lived in a rural setting don't realize the work load
that comes along with country living. Wells, septic systems, tree work and
mowing, maintaining defensible space for wildfires, even the work prepping a
garden... it takes a lot more time and sweat than many realize.

------
hedora
Anectdote: Since covid started, we refinanced after the federal government
started juicing the mortgage market with more funds, and enjoyed a stock
windfall.

On top of that, the multi—unit projects got paused, so subcontractors that
wouldn’t talk to us in February are now giving us competitive bids.

Some of the stock is going into improvements that we would have done as
remodels a decade from now.

Assuming we’re typical, the increase in starts on new construction is probably
just a blip as the construction industry catches up with pent up demand.

I’m hoping (for the people building our house, and for out long term sanity)
that it’s the beginning of a trend where commutes become less frequent, which
increase the feasible maximum radius of cities increases. I could see it going
either way.

------
MattGaiser
If you are a white collar professional, especially one with kids, your costs
have likely fallen dramatically while your income has probably remained the
same.

The personal finance subreddit for Canada is full of anecdotes from middle
class professionals who have saved a ton of money during the pandemic on
everything from daycare to lunch to housekeeping and are redeploying that
money to housing.

------
randrews
I called this a few months ago. I just today moved into a new house on five
acres in the country, and my old house in the suburbs is now worth about 50k
more than in January (going by comps).

The people with jobs that let them afford houses weren't laid off, they're
working remotely. The people who were laid off were food service / retail who
didn't buy houses anyway.

------
srj
Another factor is the current investment environment. Bonds and CDs have very
low yields, equities are too risky to fully depend on in many cases, there's
fear of inflation. People may instead be parking money in assets such as real
estate. Then when the economy (hopefully) recovers in 2-3 years they'll have
new cash flow.

------
ideals
I own a house in a tech hub. Because of the smaller inventory in the market
it's propping up home prices in my neighborhood which otherwise should be
decreasing slightly (trying not to doxx myself here)

My job will be wfh for the rest of the year.

I am considering selling my house to rent a smaller apartment further out of
the city center, though still within commuting distance (albeit long commute).

Rent prices are falling, apparently, so my idea would be to rent and save
money for a year or two before buying a house again once life comes back to
normal.

Am I way off base with this thinking?

Closing costs on selling then buying again later may outweigh benefits of
renting although I'm sceptical of that.

I estimate I can lower my housing payment buy $1200mo by renting instead of my
mortgage.

~~~
hedora
How much can you save by refinancing? It sounds like you don’t want this house
for much longer. 5/1 ARMs are 2.7%, and the rate is fixed for 5 years. Think
of it as renting for 5 years, and it seems less scary.

Of course if the house goes way down in value, and interest rates go up, you
end up losing a bunch of equity. However, the house you buy next will probably
be discounted too, so the real risk is that you’ll get stuck with a higher
rate on the next loan.

Your rental plan is also risky: if prices skyrocket while you rent, you lose
out on a lot of appreciated equity, and you still have the interest rate risk
when you buy again.

Edit: With the rental plan, you can throw all the equity into a roboadvisor or
something. Those have 5-7% real returns in “normal” years, but this isn’t a
normal year. (Though your equity in the house is effectively leveraged because
of your mortgage. If you own 50% of the house, it only has to appreciate
2.5-3.5% (after inflation) to beat the stocks.

~~~
ideals
I need to run the numbers on refi. I'm on 3.25% fixed rate now and owe ~500k
still, definitely not close to 50% paid off either.

Arm loans scare me only because of seeing what happened during the last
housing collapse.

Looks like I have a lot of research to do on this but you all have given me
some good starting poits to think about thanks!

------
carapace
I've been trying to get a mortgage to buy some land near Redding, CA. No one
wants to lend on land without buildings.

FWIW, here's the details:

It's forty-four acres, eight miles from Redding, and there was a house there
but it burned down in the Carr Fire two years ago. There's a well, septic
system, electric hookup, and concrete pad to build on already. You just have
to design your dream home and build it. Before the fire burned the house down
the property was appraised at $350K and now it's available for $80K.

It seems like a no-brainer to me but I'll be damned if I can find anybody
who's interested. Even the sketchy lenders aren't interested.

~~~
cynusx
you need a bridge loan and then a property development loan, not a mortgage.

What you want to engage in is property development and these are substantially
higher in interest rates (and typically refinanced once everything is built).

Traditional mortgages are secured by the asset value and the repayments are
secured by the potential cashflow from the property. If there's no building
then it's just the land value.

~~~
carapace
Cheers. I didn't know that.

------
tinyhouse
Suburbs are hot now but my prediction is that it's not going to have an effect
on house prices in the suburbs long term. No doubt that covid and remote work
make the suburbs more attractive for many. But remote work also means people
can spread out more and fewer people moving in to areas with opportunities
from other cities/states, which means demand in many hot places will slow
down.

My point is, if you look at any major and expensive area, most of the
expensive suburb residents are people who moved to the area because of work.
Without those people moving in, prices wouldn't have been expensive to beging
with.

------
beezle
I suppose it is all relative and that it is good starts did not tank more. I
do wonder though how many of these starts are builder spec vs pre-existing
contracts with large deposits?

Longer term chart of housing starts show just how depressed that market has
been when compared to the 70s-early 2000s.

[https://www.calculatedriskblog.com/2020/07/housing-starts-
in...](https://www.calculatedriskblog.com/2020/07/housing-starts-increased-
to-1186.html)

------
InTheArena
I’m building a house with toll brothers in the mountain west right now. As
others note - this manifests in individual lots having construction started on
them. I can absolutely tell you that they are seeing a influx of engineers
from California right now. ThT combined with very limited inventory is
resulting in significant price increases (and a removal of incentives) here.

------
twoquestions
Between remote work becoming much more of A Thing and mortgage interest rates
being six feet under, this is not surprising at all.

I share everyone else's concerns about what happens if the economy keeps going
on it's downward trend, and foreclosures start to happen again. I'm really
hesitant to speculate on that.

------
unionemployee
It seems there's almost no barrier to adding the infrastructure required for
everyone to live in individual castles, carting themselves around in ever-
growing wheelchairs to gigantic commerce centers designed for said wheelchairs
(but not humans). Will the cost of this ever come into consideration? Will
anything in America be human-sized in 80 years? Perhaps my view is clouded by
the Texas sprawl I see every day.

The pickup truck perfectly represents the excesses of this development
pattern: It consumes large amounts of fuel and takes up lots of space. With
high hoods (and often added bull bar/brush guard) it's dangerous to those
outside of it while protecting the single person inside at all costs. It can
hold four/five people while also carrying/towing a large amount of purchased
goods, and though it isn't often used for such purposes, it represents a "hard
work" ethos, especially that of the hourly worker, which fuels the consumerism
that enables such a vehicles existence.

~~~
HeyLaughingBoy
So.... you're saying there's a bunch of stuff people are doing that you don't
like?

~~~
unionemployee
My like or dislike isn’t the issue. Let’s just correctly price the
externalities.

------
viburnum
America is about four weeks away from a massive wave of foreclosures, bigger
than 2008.

------
president
Does this mean that there are a boatload of jobs that are suddenly okay with
working remotely out of state? From my SV engineering circle, none of their
companies have updated their policies to allow moving out of state.

~~~
Ccecil
I talked recently with an executive at a very large SV company. It was
mentioned that people can work remote and live in other areas but the pay is
adjusted based on the area they are moving to. I do not know how common this
is but I assume it isn't unheard of. (this was pre-pandemic policy BTW)

------
dirtyid
Demand for bunkers also up. I wonder how peppers are reacting to the pandemic,
how many of them are retreating into their safe houses.

------
yalogin
If people are really moving out if the cities why are we not seeing a
reduction is home prices?

~~~
oramit
Home prices are inelastic even in normal times. There are large transactions
costs, lots of paperwork and intermediaries, and for most people it is their
main "investment" so they are loath to sell it at a discount. Also, the Covid
crisis has only been going on for about 6 months and there has been a number
of large government interventions to avoid a financial crash. Most mortgage
holders can get a deferral on payments simply by asking and if you are
unemployed the increased UI benefits have made a big difference in keeping
people afloat. I think prices may eventually come down, but this crisis is
only in its beginning stage. I think it is simply too early to really tell.

However - even if everything goes awry and there are lots of defaults and a
large migration out of cities, we could still end up with steady or rising
real estate prices. Why? Because lower interest rates make it easier to
service debt and rates are only going down.

I got my mortgage a few years back at what I thought was a killer rate -
4.25%, now I am seeing rates as low as 2.85%. A simple example: The monthly
cost of a $100,000 30 year mortgage at 4.25% is $492. The monthly cost of a
$125,000 30 year at 2.85% is $517

Because of the change in interest rates I now have 25% more purchasing power
at roughly the same monthly price. And that monthly mortgage amount is what
really drives payment decisions. The sales price isn't so important - it's can
I service the monthly payments, and with lower interest rates you can.

------
booleandilemma
Who are all these people that can just uproot themselves and make a “flight to
the suburbs” at seemingly the drop of a hat? And then what, in 6 months time
they’re going to move back?

Moving for me has always been a _big deal_. Am I thinking about it the wrong
way? Don’t these people have leases or something? Or kids that they’ll have to
find a new school for?

~~~
war1025
I know off the top of my head I think 5 people that decided to buy houses
during lockdown. As I heard somewhere early in this, "Crises accelerate life."
Largely these are people who were planning to buy / upgrade in the near term
anyway.

Suddenly they had time on their hands and it seemed like the right time. Not
to mention that interest rates are dropping through the floor.

------
skee0083
Just rich old baby boomers retiring. They don't want to live in the cities
with young people. so they buy land out in the country to live out there final
days.

