Why the housing market is strong during an economic downturn. : The Indicator from Planet Money The coronavirus pandemic has brought with it a massive economic downturn. Another thing it's brought: A booming housing market. We explain why. | Support The Indicator here.
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Why The Housing Market Is Booming In A Bad Economy

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Why The Housing Market Is Booming In A Bad Economy

Why The Housing Market Is Booming In A Bad Economy

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This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.


And I'm Cardiff Garcia. Even though large parts of the U.S. economy have cratered this year, one of the most surprising success stories of the COVID economy has been the housing market.

VANEK SMITH: Yeah. In fact, there has been a boom in housing throughout the year. And when we first noticed this was happening, we called up Glenn Kelman, the CEO of Redfin, an online real estate brokerage. And we're re-airing part of that episode today.

GARCIA: Now, back then, Glenn told us that when the economic fallout of COVID first hit, housing demand also crashed. And he assumed that Redfin was in for some lean years. But that's not what happened at all.


GLENN KELMAN: We're hiring hundreds of people. And we're saying, there's unemployment. There's people protesting in the streets. There's social unrest. There's a second surge of infections. Should we really hire more real estate agents? And the answer so far has been, yes.

VANEK SMITH: Because there's just so much demand.

KELMAN: There's so much demand.

GARCIA: Glenn says traffic on Redfin's website is up 40%. And realtors are so overbooked that they are actually turning customers away.

VANEK SMITH: Which is pretty mind-blowing if you consider that the unemployment rate in the U.S. right now is the worst it's been since the Great Depression.


GARCIA: And I'm Cardiff Garcia. Today on the show, the coronavirus housing boom. Who is buying houses? And also, why and how this is even possible at a time when the entire country is in a terrible economic crisis.


VANEK SMITH: Glenn Kelman has been the CEO of Redfin for 15 years. And he says for all that time, people looking for a home always put this one thing as their top priority. Rich, poor, urban, rural - people buying homes always had this one big question.

KELMAN: What about the commute?

GARCIA: The commute to work.

VANEK SMITH: Yes, it's the old real estate mantra - right? - of time immemorial - location, location, location.

GARCIA: Yeah. And most of the time, those locations were big cities where most of the jobs were concentrated. And as a result, buying a home in these cities had become a kind of blood sport.

KELMAN: The New York real estate market, the San Francisco real estate market - these were insane markets where there were bidding wars with 20, 30, 40 buyers.

VANEK SMITH: Glenn says smaller cities, rural areas were just a different world. In fact, over the last few years, housing sales had been a little sluggish. And there was a bunch of speculation about why millennials weren't buying houses and what was going on.

GARCIA: Yeah, that has changed. The National Association of Realtors announced just today that from May to June, just as the COVID-19 crisis was bearing down on businesses and millions of people were losing their jobs, pending home sales rose more than 16%. That's the biggest monthly rise on record.

VANEK SMITH: That is crazy to me because, you know, like, 1 in every 5 Americans is on unemployment. Like, it's, like, blowing my mind that homeownership rates might also be going up or that there's kind of a real estate boom. But it sounds like there is.

KELMAN: Well, it's white-collar professionals who are able to work from home. In some ways, this is a sign that the economy is just officially split in two. You have people who are worried about unemployment benefits running out. And at the same time, you have other people who are able to work from home and thinking about the home all the time. And that's where they want to spend their money. These are the people who are really benefiting now because even if the economy is going through a crisis, for them, it's not a crisis. It's just a sale.

GARCIA: Glenn says that for the people who are lucky enough to have kept their jobs, a huge number of them are working from home now, and that's changed everything.

KELMAN: The traffic to listings that are in towns with populations of less than 50,000 people is up 87%.

VANEK SMITH: In other words, it's no longer location, location, location. It's more like space, space, space.

GARCIA: And Glenn says he's also seeing a big migration of people out of big cities like New York, LA, Chicago and San Francisco to smaller cities like Palm Springs, Tucson, Austin, Grand Rapids and Nashville.

VANEK SMITH: And, you know, tiny San Francisco and New York apartments that used to have 40 people in a bidding war - people have been leaving those places in droves. Tania Zapata (ph) and her husband moved to San Francisco about seven years ago. At the time, they got one of those overpriced apartments in San Francisco. But a couple of months ago, Tania and her husband noticed that a lot of people were moving out of their high-rise.

TANIA ZAPATA: I started seeing a lot of people moving out of the building.

VANEK SMITH: And Tania and her husband started to think, maybe they have the right idea, and they started looking around on the Internet.

ZAPATA: And then one day, my husband saw this house in Napa which is in the middle of a vineyard. And the house is so beautiful 'cause you have vineyards all around the house. It has a space with fruit trees and also, you know, like, raised beds for growing your own vegetables. So we were like, wow, this is amazing. Let's go to Napa.

VANEK SMITH: The house was not cheap. In fact, it was about twice the rent that they were paying in San Francisco. But it had more than three times the amount of space. Also, their parents could move in with them. They had this big yard and all this land for their daughter to run around.

GARCIA: Yeah. Glenn Kelman, CEO of Redfin - he says people are making Tania's calculation every day now - paying the same amount of money that they were paying in a dense city but getting way more space. For example, he is seeing a lot of requests for extra bedrooms for parents and grandparents and requests for extra rooms for offices and home gyms.

VANEK SMITH: And now, with so many people investing in homes and lives that are pretty far away from their offices, Glenn thinks we will never go back to work the way that we used to. In fact, he says this is what he found at Redfin when he surveyed his staff about coming back to the office.

KELMAN: And I think what we were hoping to hear is that people wanted to come back to the office because we have an office. There's a fridge stocked with diet Cokes and baskets of almonds and chocolates and won't you come back and eat all this food? And the answer was no. Fourteen percent of our workers said they want to work at least four days a week in the office, and the rest said, I want to come in only occasionally.


KELMAN: I want to stay at home. So we will ask again before breaking our lease, but at some point, you just have to wonder, why do we have four floors in downtown Seattle?

GARCIA: Meanwhile, Tania Zapata says that she and her family have been settling into their new life in wine country. And so far, she has not missed the city at all.

ZAPATA: I remember the day that we moved here. We were getting out the car, and my daughter asked me, do I need to get out the car with a mask? And I was like, no, you don't have to. This is our home now. I don't know. I mean, we'll see how things turn out within a year, year and a half, two. But so far, I'm so happy that we moved.


VANEK SMITH: This episode of THE INDICATOR was produced by Camille Petersen, fact-checked by Brittany Cronin. THE INDICATOR is edited by Paddy Hirsch and is a production of NPR.

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