Last year, when stay-at-home mandates were enforced, many homeowners soon realized their homes no longer fulfilled their new lifestyle needs. Amenities such as a home office, media room, homeschooling area, and home gym became highly desirable.
Zelman & Associates recently reported that sales of primary residences grew by 9% in 2020. That increase in demand was met by the lowest supply of homes for sale in history. High demand and low supply caused prices to skyrocket over the past twelve months. Here are three home price indexes released most recently that show how home values have risen:
- FHFA Agency House Price Index shows a 13.9% increase
- CoreLogicHome Price Insights Report shows an 11.3% increase
- S&P Case-Shiller U.S. National Home Price Indexshows a 13.2% increase
Prices increased by double digits in every region of the country and in 19 of 20 major metros. Chicago was the only exception, where prices still rose by 9%.
What does this mean to those who purchased a second home during the pandemic?
Many people didn’t want to give up a home in the city or close to their office. Instead, they purchased a larger second home farther away and moved there to stay safe and have more space. According to the same Zelman report, sales for second homes rose an astonishing 27% in 2020.
That large second-home retreat on a lake or in the mountains would demand a higher price than the average house. Let’s assume a buyer purchased such a home for $500,000. Considering the middle 13.2% appreciation shown above, that home would now be worth about $566,000.
Those who bought second homes during the height of the pandemic made an excellent investment.
What should these homeowners do now as the pandemic is receding and the economy is reopening?
The buyers of those second homes now have a decision to make. Many will move back to the original house they still own (the one that’s closer to work, friends, and family). Should they keep the second home? That could depend on answers to questions like these:
- Now that you may have to go back to the office (at least a few days a week) and students attend school in person, would you use the second house enough to warrant the expense?
- Would you go to the second home on weekends, or would you return to the activities you had before the pandemic?
If you purchased a larger second home during the pandemic, you were able to make day-to-day life much easier for those important to you. You made it safer. With those goals accomplished, you now need to decide whether to continue paying the extra expenses or sell the house and cash in your profit. If you decide selling makes sense, let’s connect today to discuss the value of your second home.
The information contained and the opinions expressed in this article are not intended to be construed as investment advice. Vivid Realty, it’s Broker Courtney Kohler and Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.