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What Comes After Real Estate’s Surprise 2020 Boom?

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Economics

What Comes After Real Estate’s Surprise 2020 Boom?


October 21, 2020
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Zillow projects that home sales will peak this fall and taper off through next year. Then what?

The pandemic has changed the way consumers perceive the life/work balance and with more people working and teaching children at home, the domicile has become much more important and has fueled the appetite for suburban and more spacious properties. But can this seemingly insatiable demand be hamstrung by supply constraints as inventory is at an all-time low?

“The more interesting thing [is] to sustain it. We can’t expect that kind of thing to continue,” Zillow CEO Richard Barton said of the market’s momentum on the company’s last earnings call. “So we have to move down the funnel to find the levers to drive the business in a sustainable way, and we have these levers all the way down the funnel that we are not yet maximizing or monetizing.”

But market analysts and industry players say current sales cannot be sustained indefinitely. 

“We have to be realistic and realize that there is a tipping point where prices go too high, and you start to see the demand…level off,” says Ali Wolf, chief economist at Zonda, previously known as Meyers Research. “The markets that we think could peak sooner, it doesn’t mean that they’re going to fall—it just means that they’re not going to see the unstoppable growth…a seemingly unstoppable growth, they’ve seen this year.”

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