A white paper released last month by the National Bureau of Economic Research, titled “Housing Demand and Remote Work,” reports that remote working arrangements are largely responsible for rising home prices across the country. Since late 2019, home prices are up nearly 24 percent nationwide.
“Our results imply a fundamentals-based explanation for the recent increases in housing costs over speculation or financial factors, and that the evolution of remote work is likely to have large effects on the future path of house prices and inflation,” say the white paper’s authors, John A. Mondragon of the Federal Reserve Bank of San Francisco, and Johannes Wieland of the University of California, San Diego Department of Economics.
The paper goes on to cite migration as a key driver of housing demand as remote working allowed people to move to suburban or exurban areas where they could obtain more indoor and outdoor space for themselves and their families.
Since early 2020, The North Shore Weekend has been covering how the North Shore real estate market has unfolded during the pandemic. Initially, agents and brokers were uncertain about what the future would bring. How do you sell homes without showing them? Are people going to make a major life decision in the middle of a pandemic?
The answer to that second question is an emphatic, “Yes.”
As we’ve covered over the past two years, migration from the city to the North Shore accelerated. Couples and families that had been content to wait a few years to move north pulled the trigger on a move early. With remote working in place, more room was in high demand.
Initially, with plenty of inventory available, it was a buyers’ market. Properties that had been on the market for years got scooped up. Swiftly, though, the market transitioned. Sellers gained the upper hand, and they maintain that upper hand today. Although, with interest rates ticking up, that may change.
This week, we talked with real estate professionals from around the area to gain a sense how they’re helping sellers take advantage of the current market when low inventory is presenting challenges for where to go after they sell.
“Sellers are having to be more creative about where they go once they sell their homes,” says Carly Jones with Engel & Völkers Chicago North Shore. “There are so many options that they can take advantage of. They just have to consider what works best for them and also take into account what the buyers can or are willing to do. It is all about working together and collaborating on the best approach.”
Leasebacks are a common way for sellers to sell their home and still have time to find a new home, Jones says. Sellers can close on their current home and rent it back for a specific period of time as long as the buyers are agreeable, and they can work it out with their lender.
“I have had other sellers who have decided to do a year lease on a rental to give them time to house hunt without the pressure. A few have stayed with their family on a short-or long-term basis,” she says. “Others have taken advantage of corporate housing and put their things in storage. The reality is there is always a way to be creative and come to a solution that works. As I tell my sellers, we will do everything possible to get them settled and comfortable.”
Jones says that in talking to sellers, it is important that they understand that if they wait to sell their properties, the market may not be as favorable. If their goal is to make the most money possible, she discusses with them how they will feel if they wait and don’t get the same price for their home, or it does not sell as quickly.
“Looking at a seller’s motivation is the most important piece of getting them to decide to sell. If you don’t understand their wants and needs, you cannot come up with a creative solution,” says Jones. “It is important to give the sellers a plan and explain the different options and scenarios for if they do sell their house and what they will do and where they will go. It is mostly about making sure there are not unknowns, but that the sellers feel comfortable knowing what the future can hold. Uncertainty is the hardest piece.”
Laurie Field, a broker with Engel & Völkers in Winnetka, advises her clients that in this kind of market with high buyer demand and low inventory, remaining flexible is key.
“I feel in this crazy time, everyone is learning to be flexible. The most effective strategy I’ve used with both buyers and sellers is offering to be flexible on the closing date,” Field says. “I’ve had buyers make an offer with the closing date ‘to be determined by the seller’ and I’ve had sellers who have wanted more than 60 days to close, inform interested parties that the closing must occur after 120 days, and agree to move the date up if they can. It seems to work well for both parties.”
Field says she recently met with a seller who liked the idea of listing their house and putting in the listing that they can’t move until October.
“They’re willing to close sooner and rent back, but they want to be up front on the soonest date they’re able to move out,” she says.
The universal message from brokers this summer is that if you’re going to sell, do it now. Uncertainty is the enemy, and if buyer demand stays strong sellers will remain in the catbird’s seat.
“With this favoring market for sellers and adding to this the novel experience of today’s rising interest rates, I highly recommend anyone who has been considering a move to list as soon as possible to take full advantage of the current seller-positive conditions,” says Joanna Koperski, a broker with @properties in Lake Forest. “Any delay in moving forward will allow these increasing interest rates to negatively affect buyers’ purchasing power by decreasing it.”
Adds Gloria Matlin, a broker with Compass in Glencoe.
“I have always felt there’s no time like the present to sell since we can’t predict the future of the market or where interest rates go,” Matlin says. “We encourage sellers to possibly rent until they make a decision on their next move.”