How the Pandemic Gold Rush is remaking the housing market
There’s a swimming pool at Brian and Mariella Winthrop’s house in Roxbury, Connecticut. Also: a Jacuzzi, a sauna, a volleyball court, a pool table, and three horses that graze on the sloping meadow in front of the white, colonial-style home. Dustin Hoffman lives down the street. It’s a nice place; quiet and secluded. The Winthrops rent it out to vacationing New Yorkers and usually get a few weekend visitors per year. This year has been different.
Their house has been booked solid since the pandemic started, for around $30,000 a month. One of the first renters was a young stockbroker who took the place for six weeks to get out of the city. “He had a lot of work to do, and he was terrified of getting COVID,” Brian Winthrop said. “And obviously he had the money.”
The rental market in Connecticut has been booming since the start of the coronavirus pandemic as New Yorkers flee the city in droves.
“I’ve seen rental rates just skyrocket,” said Cecelia Abedi of C. Abedi Realty. “I mean, I have clients looking to rent with a $10,000 to $40,000 budget, and there’s not enough on the market. It’s insane.”
Young stockbrokers or tech professionals working remotely have poured into regions outside of New York City. But the trend isn’t confined to rentals. Even as national unemployment rates rival those of the Great Depression and federal programs intended to shore up laid-off workers expire, the housing market is booming.
It may seem counterintuitive that after the 2008 financial debacle ignited a mortgage crisis, the pandemic-fueled recession could lead to a bullish housing market.
But aside from the predatory lending and speculation that allowed the last mortgage crisis to explode, the fundamental trends in home purchases over the last six months are also different.
Construction is still down, and federal mortgage forbearance programs are in place until next year, which means that housing supply is relatively low. Those looking to buy are encountering a competitive market where multiple bids can push prices up.
The Fed has also made sure that interest stays low, which means mortgage rates are lower than they’ve ever been.
“People are looking to buy because one of the effects of the pandemic is how to shelter at home in a place that is conducive to sheltering at home,” said Susan Wachter, professor of real estate and finance at Wharton.
“That generates demand for those with resources to move to that spot where they can, in fact, be more comfortable at home while they wait this out.”
In Connecticut, where Abedi said transactions are up about 86% over last year, that means things like swimming pools and at-home gyms are at an even greater premium.
“All of a sudden a lot of these families, they wanted a yard. They wanted their own space. And if you had a pool, a built-in pool, those houses are gone in five minutes,” said Carolyn Sullivan-Brodsky, a realtor with Todd David Miller Homes of the Higgins Group.
“A lot of these buyers are now paying a percentage higher—they’re overpaying, which is crazy, but that’s what they’re doing now.”
Real estate agents in Connecticut have seen an increase in cash buyers and a spate of bidding wars; one realtor told me she saw 22 offers made on a single house.
In Fairfield County, the wealthiest in Connecticut, the average price of a home sold since the beginning of March is 11.7% higher than during the same period last year.
According to United States Postal Service data, nearly 10,000 New Yorkers have changed their address to one in Connecticut since the pandemic began. Local blogs are buzzing with rumors that Bradley Cooper has rented in Fairfield County, prompting fan stakeouts at spots where he was allegedly seen with Leonardo DiCaprio and Brad Pitt. One realtor cited this as more evidence of increased enthusiasm for living in the suburbs.
Beyond high-end real estate, secondary markets across the country are also moving at a clip thanks to increased remote-working options for professionals who can still afford to take on a mortgage.
According to data from Zillow, while suburban houses in general net more interest than urban ones, the only big urban markets that have seen prices decrease are New York and San Francisco.
Compared to last year, houses listed on the real estate platform are generally selling in half the time, according to Jeff Tucker, an economist at Zillow. It’s not just low mortgage rates and a desire for more space that are behind the spike, but expectations about the housing market based on the last major recession.
“A lot of people thought, Okay, last time there was a recession it meant that there were tons of homes with desperate sellers sitting on the market,” Tucker said.
While that hasn’t happened yet, the housing boom has underscored how the pandemic has deepened existing divides in stability across the country. According to Tucker, the people buying homes now are disproportionately white and wealthier than the overall group of renters, especially those in their 30s (when most first-time homebuyers enter the market).
Pandemic-related layoffs have also been more widespread among occupations that employ more renters than homebuyers.
“Frankly, a lot of these very bullish data points and predictions on the purchase side of the housing market are kind of mirrored by a pretty dark picture in the rental-housing market, where a lot of renters have lost their jobs,” Tucker said.
One of the biggest divides, according to Wachter, is between those who can work from home and those who can’t.
“The technology that’s enabling [people to] work from home is a technology that’s possible for knowledge workers,” she said. “It’s not possible for workers who are service workers in in-person jobs. Those jobs are gone for now.”
Meanwhile, the suburban bidding war shows no signs of slowing as the pandemic stretches on. “I don’t know what is in the future for Connecticut right now,” Abedi said.
“But I’ll tell you, Fairfield County is becoming a little suburban New York.”
There are moments, as you make the 90-minute drive up the coast from Los Angeles to Montecito, where Prince Harry and Meghan have set up their new home, when you can almost imagine you are heading into an unspoilt wilderness.