As a Realtor, I am constantly reading and trying to learn as much as I can about the environment of both the local and national real estate markets. I have found that there are a wide variety of opinions depending on who benefits and who the article is written for or about. I often find myself asking if the information is written for a self-serving purpose, or written through a lens of truth backed by facts. Indeed, it is hard to tell these days as moving to a new city is becoming more difficult.
Determining if and where to move is on a lot of minds since the COVID-19 pandemic along with our changes in job habits. With thousands looking to move out of the crowded urban environment, we are witness to the ever-growing problem that moving to a new city isn’t as easy as it used to be, in fact, it has become more difficult.
Lately, I have run across numerous headlines such as “The Housing Market Is Going To Skyrocket in 2021” and “Get Ready For The Giant Housing Bubble To Burst”. I’ve seen both of these sorts of headlines on the same morning. Which is correct? Of course, it’s hard to say for certain and rather difficult to predict the future.
I wanted to try my hand in finding the answer or at least gain a better understanding. I’ve been comparing real estate markets in cities across the country. I’ve learned all sorts of valuable information and the biggest takeaways are that every market is unique, every location has its good and bad points, and what they all have in common is that home prices have been on the rise just about everywhere for a while. There are a growing amount of Americans that have little to no savings, high-interest debt, and inconsistent work that requires numerous jobs. What do their choices and opportunities look like for moving?
There Is A Bigger Picture To Consider
For instance, living in the southern parts of New Hampshire will cost you an arm and a leg in property taxes and will most likely require a crowded and distant commute to earn a decent salary. While some towns like Dover, New Hampshire have an affordable median home price of around $300k it may seem like a good deal at first but if you look closer, it comes with a high price tag for property taxes. The taxes will cost you around $8,500 a year. Also, I wish you luck in finding a home that isn’t really old and needs loads of updating, like 19th century old.
Moving to a new city, you might find yourself renting for a while, but decent rental homes in Dover that have an affordable price (e.g. 3 bedrooms, 2 baths under $1700 a month) are practically non-existent, in fact, that’s about what a one-bedroom apartment runs you here! The schools are good (mostly) and the crime rate is quite low. It doesn’t matter though, if you are one of the growing numbers of Americans who don’t have much in savings, have high debt, loads of school loans, or don’t already own a home that you can sell for a profit, unfortunately, you are a person who really can’t afford to move here.
An Island In the Middle of Nowhere
I looked at other areas too. Roanoke, Virginia. It has a median home price of around $200k and the average sale price of $304k. Wow! Property taxes are quite low in VA which is a plus, running at .80% which is far below the average for the US. So, why is it so cheap?
For starters, according to a US World News article, Roanoke is the forgotten city of Virginia with more in common with West Virginia, says many who live in Richmond. Here, the lawmakers like to pretend Roanoke is not part of Virginia! It has a big problem with crime and opioids and it doesn’t seem to be prospering like many other places within the state.
The area’s crime rate might get better, but much of their economy is tied to Roanoke being a location away from other places, making it a bit of an island with large amounts of the population commuting in and out of the area. Rather a flip of the coin if you want to move here for the fabulous Blue Ridge Mountains hiking trails. Which look magnificent, don’t they?!
Many Desirable Cities Are No Longer Accessible To Many
Other places I’ve researched have quickly outpriced themselves in housing markets. Places like Denver are incredibly expensive. Flagstaff, Burlington, Austin, Portland, Salt Lake City, and many others are all difficult markets to move into based on the high cost of living and either high rental rates or a combination of high rates and low inventory. The number of desirable cities across America where most people are able to thrive has grown smaller over the years.
Does all of this mean that moving to another area is harder to do? Yes, it does. Is there an economic and housing affordability gap happening? Yes, there is. How do we get out of this problem?
A New Incoming Administration
It is my belief that the first step has already happened, yet there is much that still needs to happen. The first step was to elect a president who understands that there is a growing and more pronounced disparity when it comes to income and cost of living in this country. The disparity is directly tied to the inequality of race and ethnicity, all of which affect home buying and renting.
Come January 20th, one of the major issues that President-Elect Joe Biden has said he will tackle is to make sure “affordable housing is located near good schools and with a reasonable commute to their jobs”. This caught my eye! I have been looking for just those attributes in a city and am having a difficult time finding them.
We Need Bi-Partisanship
Solving this issue isn’t an easy problem to quickly repair. It requires not only the US House of Representatives to make the legislation but also the Senate to work in a bipartisan manner, which so far, doesn’t seem to be the direction the Republican party has been willing to embrace with the Democrats. If Republicans hold the Senate after the Georgia runoff election in 2021, any sweeping bill seems practically doomed to die there.
Real bipartisan work needs to happen within the US Congress. If the President-elect hopes to complete his agenda, he will need to find a way to garner the support needed from possibly both parties.
*Update Jan. 13, 2021 – Wow. What an unbelievable couple of weeks we are having. The attempted coup of the State Capital and the second impeachment of Trump started us off into 2021. There are also two newly elected Democrats to the Senate thanks to the Georgia runoff election. That makes the Democrats in charge of both the House, Senate, and the Presidency, beginning Jan. 20th.
Housing Taxes Overhauled
From President-elect Joe Biden’s website, he says he will “Provide Financial Assistance To Help Hard-Working Americans Buy Or Rent Quality Housing,” and further says:
“Help families buy their first homes and build wealth by creating a new refundable, advanceable tax credit of up to $15,000. Biden’s new First Down Payment Tax Credit will help families offset the costs of home buying and help millions of families lay down roots for the first time. Building off of a temporary tax credit expanded as part of the Recovery Act, this tax credit will be permanent and advanceable, meaning that homebuyers receive the tax credit when they make the purchase instead of waiting to receive the assistance when they file taxes the following year.”
In case you didn’t know this, a “first-time homeowner” is someone who hasn’t owned a home in three years or more.
The homebuyer tax credit by itself is great news, unfortunately, there is some bad news attached to it. The problem with it is that we currently have a housing shortage in many places across the US. If we just add more fuel to the buying market without increasing the supply, we’ll see home prices rise even higher than they have. A note of concern is that a record number of homeowners decided to refinance their homes rather than sell. Their decision based on the historically low interest rates – or in other words, practically free money to borrow. Turning around and selling might not be a good idea right away as the costs associated with loan refinancing and new loans cost homeowners money.
Bigger Issues To Address
To make housing more affordable for more people, you have to fix the entire issue of Housing Affordability. This issue spills into other areas of our economy. It includes having a plan for the huge numbers of potential homebuyers who can’t seem to get out of debt from school loans. President-elect Biden’s plan finds a solution for those who have extraordinary high health insurance premiums/bills (or who can’t afford insurance). It requires fixing our outdated and disproportionate inequalities in our school systems. It necessitates paying people a living wage of at least $15 per hour. These are big issues that directly affect who can afford safe housing with decent schools while also not requiring them to commute to work too far away from home.
Section 1031 Tax Break
President-Elect Biden has also called for an end to the Section 1031 tax break for real estate investors. The provision lets owners sell a property without paying capital gains taxes if they use the proceeds to buy other real estate. While such a change wouldn’t directly affect consumers, it could hamper the supply of housing by making landowners less willing to part with parcels that could be otherwise used for someone else’s housing.
Energy Efficiency & Housing Benefits
There is a lot more to Biden’s plan that I hope takes shape. He will promote home energy efficiency by giving incentives to communities. Biden says that he will create a new public credit reporting agency that’s non-profit and provides consumers with more fair and understandable credit reporting. He wants to provide housing benefits for first-responders, public school educators, and other public and national service workers.
Section 8 Rental Assistance
There are roughly three in four households eligible for Section 8 rental assistance that do not receive housing assistance because the current program is underfunded. President-elect Biden wants to give a renter’s tax credit to help more low-income individuals and families who may make too much money to qualify for a Section 8 voucher but still struggle to pay their rent. Biden proposes, providing Section 8 housing vouchers to every eligible family so that no one has to pay more than 30% of their income for rental housing.
Enforcement Against Discriminatory Lenders
Within the US, there are many discriminatory lenders that use racial bias that leads to homes in communities of color being assessed by appraisers below their fair value. President-Elect Biden wants to restore the federal government’s power to enforce settlements against discriminatory lenders. I think all of these are admirable goals.
The American Dream
Taking these steps and others that help homeownership and rental housing more accessible to everyone is equitable and indeed fair. I’m not talking about making more slum areas a part of a city where the poor and downtrodden live. I’m advocating the creation of affordable well built energy-efficient homes, located in areas that are safe for all of our children. This includes making education excellent throughout every income level and neighborhood (not just the richest). It means being able to live and work nearby and make a living wage in one job. Over the past decade or more the American dream hasn’t materialized for many and has disappeared entirely for others. Moving to a new city has become more difficult. It’s time to bring it back within reach for every American.