“When the pandemic erupted in the spring of 2020, some people — including more than a few in the real estate field — were predicting a massive, if not unprecedented drop in sales,” commented Paul Kaulesar, who is currently one of the top producers for On Call Realty in Palm Beach, Florida. “However, in many markets across the country including here in Palm Beach, we are not just seeing sustained activity, but highly increased activity.”
As for what is driving the ongoing surge in home sales, Paul Kaulesar points to a few factors: historically low interest rates, more people working at home, more household saving, and the use of advanced technology to virtually showcase homes. Each of these aspects is discussed below.
Historically Low Interest Rates
When it comes to purchasing a home, the number that typically matters most to prospective buyers is not the selling price — it is the interest rate. For example, the difference between a $500,000 mortgage (5 year term, 25 year amortization, 2 compounding period per year) at 2% vs. 5% is over $66,000. To put this in simpler terms: homeowners can buy more home for less money when interest rates are low vs. high — and that is precisely what many of them are doing.
“Many homeowners who have been sitting on the fence about buying their first home, or upgrading to a home that better suits their needs, preference and lifestyle, are recognizing that they will save tens or hundreds of thousands of dollars in mortgage payments if they act now,” commented Paul Kaulesar. “While nobody expects the Fed to suddenly drive up interest rates tomorrow — the pandemic and its economic impact are far from over — eventually rates will rise, and who knows if they will ever be this low again.”
More People Working from Home
Folks who have been obliged to trade their corporate office for a home office are, for the most part, happy with the change of scenery — especially since it means they don’t have to face a tedious commute each day (research has shown that the average commute time in the U.S. is around 30 minutes a day, which calculates to about 130 hours per year). However, many of them aren’t happy with the size or configuration of their home. And while some are solving this problem through renovations, others are deciding that it is simpler, faster and possibly even cheaper to stick a for sale sign on the lawn and change addresses.
“Even after the pandemic is over and things return to normal — which some public health officials are saying may not happen until 2022 or 2023 — many people will continue working from home; if not full-time, then at least part time,” commented Paul Kaulesar. “And so, these people are thinking ahead and realizing that it’s in their best interest to move now, rather than wait a few years when interest rates may be — and almost certainly will be higher than today, and supply may be even more limited.”
More Domestic Migration
The pandemic has convinced many people to pull up stakes and head to another part of the country — which in turn is driving up both real estate demand and prices in coveted destinations.
“People from across the country are flocking to Palm Beach like never before,” commented Paul Kaulesar. “The combination of weather, lifestyle, the desire to flee COVID-19 hotpots, and Florida’s zero state sales tax are all contributing to a very strong market.”
The Use of Advanced Technology
When open houses were banned early in the pandemic — and in many parts of the country they are still forbidden — there was a great deal of concern and dismay about how sellers and buyers would connect and facilitate a transaction. Fortunately, that is where advanced technology entered the picture and closed the gap. Without having to leave the comfort and safety of their homes, buyers can take detailed 3D tours of various properties. They can also explore a wide range of data regarding neighborhood features, future area development plans, historical home prices, and more.
“Virtual open houses are live streamed events where buyers can chat with their real estate professional and ask questions, learn about details, and so on,” commented Paul Kaulesar. “And since virtual open houses are recorded, buyers can review them later on as often as they wish, as well as share the recording with other family members, friends, and anyone else whose opinion and feedback they wish to solicit. Even when open houses are back on the roster, virtual open houses in some manner are going to be a permanent part of the home hunting experience, which is good news for both sellers and buyers as it can accelerate a mutually beneficial connection and transaction.”
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