Is ‘Pandemic Greed’ Artificially Raising Home Prices? Here’s What It Means for Your House
Lately, San Francisco-based real estate broker Tracy McLaughlin has gotten used to clients pushing to list their homes above market value. But wanting to list it at double what their real estate broker suggests? That’s a new one—and it’s a sign of a larger trend the Real Estate Rescue author is calling “pandemic greed.”
“There’s always a little bit of lag time between people’s digestion of what they think their home is worth and the news reports [about the market], which in so many ways govern whether people feel confident buying and selling,” McLaughlin says.
And right now, the market looks good—like, best-it’s-been-in-more-than-a-decade good. Low interest rates, coupled with a demand for homes that exceeds supply, has led to list prices steadily climbing, particularly in the suburbs and Midwestern metro areas (the latter’s home prices are up 10 percent year over year, according to CNBC).
“Serial tenants are becoming buyers,” McLaughlin explains, as many city dwellers learn they can work from anywhere—or simply need a fresh start in a new place, preferably with better square footage and a lower cost of living. For potential sellers everywhere, it’s a golden opportunity…as long as they don’t let it get the best of them (and the market as a whole).
How ‘Pandemic Greed’ Started
It’s only natural that after hearing stories about people cashing in big selling their homes that you might be inspired to do the same; the challenge, however, is when people get so starry-eyed over the chance to get rich quick that they start demanding unrealistic prices.
“People think, ‘if the comps say my house is worth $300 a square foot, I’ll jack it up 25 percent over that because I can—or I think I can,’” McLaughlin says. “That can kill the market as fast as it was created.”
Those serial tenants might stay serial tenants after experiencing such sticker shock: “Educated people who are buying homes won’t pay sky-high prices,” McLaughlin explains. “Whatever you’re asking, it has to be defensible.”
What to Watch Out For
So, what do those “educated buyers” do to ensure they’re getting a fair price, particularly if they’re moving from another state and aren’t as familiar with the going rate in their dream town? They look at the comps—aka what comparably sized homes in the area have recently sold for—and not just the ones sold in the past three months. They’ll go back two to three years, seeing how the average price per square foot of the homes in the area has shifted. A huge jump in just a few months’ time is a red flag.
“At the end of the day, there are no Picassos in real estate—nothing should shoot that high,” McLaughlin says. “The comps tell the story in terms of what something’s worth, and the buyer should look at this data carefully, going through the pluses and minuses of each home. From there, they can draw conclusions of whether they want to pay more for the home right now.”
As for the client who wanted to list her home at double its estimated value? McLaughlin asked her to honestly assess why she thought her house was worth that much. When it still seemed like the market wouldn’t support such a high ask, the conversation shifted: If you value it that much, why not keep living there and enjoy it? Sometimes, all it takes is a little house hunting to make you appreciate your own abode that much more.