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Why Home Sales Are at a 12-Year High

The housing market has been red hot since the pandemic began, and home sales have remained elevated.

In this episode of The Five, recorded on Aug. 23, Fool contributors Jeremy Bowman, Brian Withers, and Toby Bordelon dig into the drivers behind rising home sales and discuss what's next in the residential real estate market.

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Brian Withers: We're going to move to the third news item, and home sales are up again this month. It's really interesting. There was a 12-month low in May, and so things have climbed for the last couple of months. But if you go back to October, the October 2020 high was a significant high for, like, back through 2008. So the places where things are, and maybe rather than just me draw the thing with my hands, let me share the slide here.

So this is home sales over the last decade. So let's make a little bar column. This looks easier. You can see that this month was almost, I want to say, 6 million home sales last month. Other than these few months here, this number, you go back 25 years and it's a high going all the way back to, like, 2007. So this is a pretty high-water mark as far as home sales go in the U.S. And it was sort of fascinating to me, and so I'm wondering if this trend is going to continue. You've got the remote-work thing going on. The delta variant has potentially accelerated sales for the coming month. So what the heck is going on with home sales, and do you think it will continue over the next year or so? Jeremy, why don't you take this one first?

Jeremy Bowman: Well, yeah, I think that the housing market has been pretty crazy since the pandemic started. And I think what we're dealing with now is nobody really knows for sure what the post-pandemic situation, as far as remote work and all that stuff, is going to be. I don't know anybody who is like, oh, yeah, I'm definitely going back to the office five days a week, and everybody I talk to is like, well, maybe after Labor Day, it might be part-time. The delta variant has thrown all this stuff into the air. There's even more uncertainty than we thought we were dealing with before.

So I think of all the trends we've seen during the pandemic with e-commerce, and cloud computing, Zoom, and all these things that have taken off and gotten traction, I think remote work is probably going to be the stickiest. A lot of people seem to like it. It obviously offers benefits for parents and other people who maybe need to check out for a few minutes during the day or have other needs to attend to. I don't think anybody really misses commuting. So if you have the freedom to work from wherever you want, you're going to take advantage of that.

And so I think the trend that COVID sparked, with people moving out of high-priced cities and looking for more space and re-evaluating or balancing what that quality of life looks like, it's going to continue.

I think another point worth mentioning is that Airbnb (NASDAQ: ABNB) and these vacation rental or home sharing sites have really taken off. Now your home is a monetizable asset in a way it wasn't before, and if you can remote work, if you're a single person, you can just rent out your apartment or whatever for a month and go travel and do that sort of thing. That may not be directly related to the housing market, but I think it might change the way people think of it, or, hey, I can buy this beach house and just rent it out when I'm not there. I think that's going to also drive the housing market as well.

Toby Bordelon: Yeah, I do agree that the work-from-home trend, I think, is going to continue. I think that's going to be here to stay in some form. I don't know that it's going to have a huge impact in the housing market long term, though. I think eventually we're going to level off, like we are going to see these sales level off. Or at least the rate of increase is going to slow in terms of price increases.

A lot of what we're dealing with -- we talked about this before a lot -- is supply issues. Eventually, that rectifies itself. It will take a while. We're talking about housing. It's not something that you can say, let me build a few more computers and we're good to go. [laughs] It takes a while to build the house. And it takes a lot of skilled labor to build a house. That's another part of the equation. But eventually, we're going to get there.

I'm also seeing, though, stories of increasing rents in places like New York City, like back to pre-pandemic levels and even above, indicating that this whole narrative of people fleeing the cities might not be all it's cracked up to be. Just like you think back two years ago, people were talking about millennials don't want to own homes in the suburbs. Well, as it turned out, they did. They just couldn't afford them. [laughs] And as it turns out, people do like living in cities to some extent.

I think back to when I lived in New York. I didn't move to New York for a job. I decided to look for a job in New York because I wanted to live there. I wanted the career and I wanted to do the work that was done in New York, but I made a conscious decision, that's where I want to be. Let me look for a job there. Not, oh, I have this great opportunity; I guess I have to move to New York. Just because you can work from home doesn't negate the social and entertainment value of being in a particular place and the lifestyle of being in that place, and if that's what you want, that's what you want, at least for a time.

So I could certainly see that even if law firms and accounting firms and all kinds of offices and people within offices in New York are saying you don't have to come to the office all the time, people could say cool, but I still want to live here. How am I going to make that happen? And maybe that means you to have a bigger place or whatever.

But I think just because we're going to see a trend where we work from home doesn't mean that there's suddenly going to be this perpetual increase in prices. Eventually it will settle out, and people will be where they want to be, both to live and then work however they want to work. You're going to see a reshaking and a rethinking of things, but we'll come to an equilibrium again at some point.

Brian Withers owns shares of Zoom Video Communications. Jeremy Bowman owns shares of Airbnb and Zoom Video Communications. Toby Bordelon owns shares of Airbnb and has the following options: short October 2021 $135 puts on Airbnb. The Motley Fool owns shares of and recommends Airbnb and Zoom Video Communications. The Motley Fool has a disclosure policy.


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