- \ Gerard Gruber
- February 10, 2022
Americans are on the move. Two years of a pandemic only accelerated a trend that has been unfolding for several years—Americans trying to escape the cities and high cost-of-living states in search of a better life. The result has been a steep rise in housing costs, making it difficult for an increasing number of people...
Americans are on the move. Two years of a pandemic only accelerated a trend that has been unfolding for several years—Americans trying to escape the cities and high cost-of-living states in search of a better life. The result has been a steep rise in housing costs, making it difficult for an increasing number of people to find affordable homes. The question forced upon many people is whether it makes financial sense to move at all.
And what about those individuals who are forced—due to death, divorce, marriage, or otherwise—to move while the housing and rental markets are this high?
Home, Rental, New Construction Prices are Going Through the Roof
Rising home prices were trending before the pandemic due primarily to a shortage of houses relative to demand. But rents were either falling or remained little changed. The sharper imbalance of supply and demand two years into the pandemic is now impacting rent prices which have experienced double-digit increases in the last year. In some parts of the country, especially in the suburbs, it may be cheaper or make more financial sense to buy rather than rent. But that still doesn’t mean it’s affordable.
To make matters worse for prospective home buyers, trying to buy a home in many of the fast-growing areas of the country, such as Texas, Florida, Idaho, or Tennessee, is like trying to jump on a moving train. Homes are snapped up within hours of listing, often at sale prices well above the listing price, pushing up prices of remaining inventory as well as the surrounding rental market. The steep competition for homes coupled with rising rents is putting many people in a difficult, often untenable, position.
Housing industry experts expect home appreciation and rent growth to slow in 2022 but not stop. Although new construction is picking up in many of the faster-growing areas of the country, higher construction costs due to inflation and supply-chain issues are pricing many families out of the market. That also contributes to increases in existing home and rental prices.
So, What is the Answer?
People move for many different reasons. More recently, the impetus for moving has centered on escaping unfavorable conditions, such as excessive government intervention in the COVID crisis, government regulations in general, rising crime, or the high cost of living. All justifiable reasons for anyone who wants a better life for their family.
Still, each family must weigh the costs and benefits of moving out of state in terms of what it would mean for their finances now and in the future. It’s easier for some people who can sell their home in California for $1.5 million and then plunk down $500,000 in cash for a home in Idaho. They can compete in the bidding wars better than families confined by tight budgets with minimal down payments. Just the sheer costs of moving across state lines are prohibitive for many families.
You Still Have Options If You’re Flexible
If you’re simply looking for greener pastures, it probably doesn’t make sense to move right now. However, if you’re forced to move for family reasons (i.e., divorce, need more space, needing to be closer to a loved one, etc.), there are always options. Even better if you’re not tethered to an office desk and have the freedom to work remotely. In that case, you have plenty more opportunities to find a reasonably priced home in a family-friendly town away from the action.
For example, the surrounding towns around Boise, Idaho, are a popular destination for relocators, which is why housing costs have risen by more than 20 percent in the last two years. However, instead of buying a $700,000 house in Meridian, just outside of Boise, you can live 40 minutes away in the bucolic town of Emmet with everything you need for less than $400,000.
Regardless of the reason, it’s critical to conduct a thorough assessment of your finances, priorities, and the tradeoffs you’re willing to make to determine what you can afford. You might not land in the particular town you want, but you can get close.
Whether you are looking to relocate, or life’s circumstances demand a move, keep in mind that your move need not be permanent. It may make the most sense to relocate to an area you can afford now in order to preserve finances for the home you want in the future.
How do your housing costs fit into your financial picture?
This information is for general purposes and is not intended to provide specific investment advice or recommendations. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. Individuals should always consult their own financial or tax advisor regarding their specific situation before acting on any information provided. Harbor West and Geneos Wealth Management, Inc. do not provide tax or legal advice.
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