We're going to try to make some guesses about the future of the real estate market.
I am beginning to believe that previous estimates or guesses we had about what was
going to happen, almost certainly within the next 6 to 18 months may have been a
little bit too pessimistic, especially for homes that are on acreage, homes that are a
little bit away from the city.
At the end of 2020, the thinking was that the shortage of homes on the market was
caused by the fact that people didn't put their homes up for sale during the traditional
spring selling time, because they didn't want strangers walking through their home
due to the pandemic.
So come 2021 when the pandemic fears had lessened then sellers that didn’t sell in
2020 would put their homes on the market and that would cause a surplus of homes
and that real estate prices might grow softer. We know now that’s not what
happened.
But how does that affect homes on acreage? Now, what typically has happened in the real
estate market is that homes in subdivisions sell about twice as fast as homes on
acreage. Before 2020, if you were going to sell a home and it took 10 days to sell a
home in a subdivision then it meant it would probably take 20 days to sell a home
that was on acreage. If the market was slow and it took 30 days to sell a home in a
subdivision, then it would take 60 days to sell a home that's on acreage. But that's
not what we are experiencing now.
Homes on acreage are selling just as fast as homes in subdivisions. For our last
several listings, and we just had one this past weekend, we put it on the market, it
sold within 36 hours, above the asking price.
That has been the experience we have had with almost all of the homes that we’ve
recently sold. Now the reason previously that homes in subdivisions sold faster is
because buyers wanted to be near their work. People had to go into the office to
work, and so they wanted to make their commute as short as possible, and that
typically meant living in a subdivision.
They also found that some of the services that they are typically used to having and
enjoying, in particular, internet service was not quite as mature, or as cutting edge
out in the country. So, you had this situation where if you lived in the country you had
a longer commute, you didn't have good internet service, and as a result that would
drive people to stay in subdivisions.
Now they still wanted to live on an acreage, that's almost everybody's dream
scenario, a few beautiful homes out in the country, perhaps with a pond, secluded
quiet, and private. But up until now most of the time, the people that bought those
homes were at the end of their working career.
Most of our buyers would be in their 50s, maybe late 40s. The kids were gone or
could drive themselves, they didn't need to be near a school as much as they did
before and they are in a career position where they could dictate the terms of their
employment. All of those things have been changed with this pandemic and the
reactions that our society has had to it. Now homes on acreage are selling as fast as
any homes in subdivisions. We are seeing some astounding things happen around the
country.
For example, New York City real estate pricing has absolutely collapsed. Nobody
wants to live in a crowded city, particularly when your life means getting on an
elevator and going up to the 15th-floor condo where you have to share the elevator
and living space with lots of other people, not to mention the safety factor that some
people feel about living in close quarters.
As an example, those areas around New York City are seeing stunning increases in
real estate. For example, Martha's Vineyard has seen a 206% increase in land
prices, and they have had a 47% increase in home prices over just the past year.
By comparison, if you owned a home or condo, say in Brooklyn, or New York, those
sale prices have dropped by 43%. You go to a place like San Francisco, which is
renowned nationally for having an extraordinarily high, hot, expensive real estate
market right now you’d find that unsold homes in San Francisco are at a 15 year
high.
The reality is that we have learned that many tech workers are never going to go back
to the office. I know certainly my own sons, who worked in an office complex in
Kansas City was told by their employer that once they were forced to work from
home because of the pandemic that the company found they were just as productive
working from home, and so there is no need to have an expensive office. They were
told that they would not be renewing their office lease in the future and they should
plan on working from home from now on.
So that means is, they can live anywhere that they have good internet service. Right
now, we are trying to find homes for two people from the San Francisco area, and
another gentleman from the Washington DC area. In all three cases, their companies
told them the same thing that my sons were told, and I quote; "We are not going to renew our
office leases anymore. You can live anywhere you want, just make sure that you
have good internet services."
They are taking a look at what they are paying for real estate in San Francisco and in
Washington and they can live a lot cheaper in the Kansas City area. They can now
decouple geography as one of the primary reasons for buying a particular piece of
property. All they need now is good internet access. That brings us back to what is
changing about living in the country.
There has been an explosion in the past four years of broadband internet service in
rural areas. For example, I live south of Kansas City, on a small plot of land. I am
looking out my window and I can see a company installing fiber optic cable in my
front yard, I will now have fiber optic service available to me, which means I'll have
the same internet service, same speed, and same reliability, as somebody who is
living in the heart of the city.
Now even before that, we had excellent internet service with our fixed wireless
provider. But now I have got the choice where I live of three fixed wireless providers,
which for most people provide outstanding internet service or fiber optic cable. Now,
if you are a buyer of real estate, and you are thinking, do I want to live in the crowded
city? Do I want to live where we are so close to one another that I have to worry about
wearing a mask all the time? Do I want to continue to worry about crime, or waiting
until I'm 55 or 60 to buy my country home? Why don't I buy it now?
I can have my children live and experience country life now. They can have a
pond and go fishing, and the noise they hear will be birds chirping instead of traffic
and sirens.
As a result of all this, we don't think that we are going to see a drop in activity or desire
for people to live on homes and acreage. Right now, as I mentioned earlier, homes
on acreage are selling just as fast as homes in subdivisions but many of those things
that previously drove people to live in homes in subdivisions have gone away.
They are not worried about their commute anymore. They have got great internet
access and they can have now a lifestyle that is now going to be available to them at
a younger age than they ever thought before. We believe that means there is going
to be greater demand for homes on acreage than has historically been true.
I think long term that no matter what happens to the real estate market, we are not
going to see that split that we used to see between the demand for homes in
subdivisions versus the demand for homes on acreage. I think homes on acreage
near the city, but not in the city, are going to be far more popular than they have been in
the past.
Then you add in the fact that the biggest driver of demand in real estate, is interest
rates, they are currently at 50-year lows. If interest rates stay at that level, that will
make the demand for real estate everywhere strong. You add to it the fact that
people increasingly want to live in homes on acreage, I think there is good reason for
people who are thinking about selling a home on acreage to be very optimistic.
We are convinced that the demand for homes on acreage isn't just a short-term
trend, and that we are going to see continued strong demand both for the immediate
and long-term future.
If you, or anyone you know, are thinking of making the move to the country, give the Rural KC Team/Keller Williams Partners a call. We can help you. 913-837-0760 or 913-837-0411.
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