by Michael Perna
on Thursday, December 17th, 2020 at 2:47pm.
How can home prices be rising so rapidly when we have such a high unemployment rate?
The Case-Schiller Index, which tracks home values, recently reported that home values went up by a record amount in September 2020—the highest rate of appreciation for any month in the last 20 years! Much of that has to do with low interest rates, which caused buyers to flock to the market and eat up the already limited inventory. If you’re thinking about selling a property anytime within the next six months, now is a good time to meet with us to make sure that you’re maximizing your home’s value and marketing it to the right buyers.
At 1:44 in the video above, you’ll see a chart that compares unemployment levels to the weekly earnings by industry. The chart shows that the leisure and hospitality, retail, and transportation industries are the hardest hit when it comes to unemployment.
Low interest rates allow high wage-earners to pay more for homes, which boosts home appreciation.
On the other hand, industries like financial services, wholesale trade, construction, and manufacturing all have relatively low unemployment levels and very high weekly earnings. These trends aren’t mysterious; the lockdowns imposed to prevent the spread of COVID-19 changed people’s habits, which had a tangible impact on certain industries.
So how does this all tie in with home prices? Well, unemployment is largely bunched up with the low-end wage-earners; the higher-end earners were less affected, so they’re the ones who have been flocking to the market. Due to low interest rates, their purchasing power increased, meaning they can afford to pay more for homes. That, in turn, pushes up home appreciation.
If you have any questions about the market and the latest trends we’ve noticed, please reach out to us. We’d love to help you.