The housing market is not keeping up with the supply needed to meet demand, and as a result prices are skyrocketing, in part because of record high lumber prices that have driven up the costs of new home construction. In the past year alone, the median home price shot up 14.4 percent with 36 percent of listings going for more than their asking price. To cope, multi-generational homes have made a comeback.
Scott Hatch is a construction inspector in Orange County, California. Hatch always wanted to purchase a home, but struggled to afford the steep price tag in his area. Recently, he found a solution. He and his wife Lani purchased a $466,000 property with friends in Flagstaff, Arizona.
The town is seven hours away from the Hatches, but the purchase will allow them to enter the real estate market. “I just wanted to put my money somewhere that I could go to and know it’s mine,” says Hatch.
Hatch is not alone in being priced out of his market. Housing costs account for one third of after-tax income in the United States, taking up a significant portion of Americans take-home pay. And all signs point to this expense only continuing to rise.
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“We have to coach these first-time homebuyers initially and say to them, ‘the market is crazy right now. If you want to play the game that’s great, but this is what we are going to have to do to win,’” Kathleen Martin, a real estate agent with Speicher Group of Long & Foster Real Estate in Maryland, told CNN.
How Many Are Responding to the ‘Crazy’ Market
While the competitive market could create additional headaches for some buyers (or price people out all together) a growing number of families are finding a way to beat the system: they’re moving back in together.
A survey by the National Association of Realtors found that some 15 percent of recent homebuyers (between April and June of 2020) planned to have multiple, adult generations living at their new property. That’s an 11 percent increase in multi-generational buyers over the prior year.
Additionally, a Realtor.com report shows listings with terms like “in-law cottage” or “granny suite” sold 23 percent faster in February than they had the prior year.
There are many factors that could be driving the increased demand for housing. People are fleeing high tax, strict lockdown areas and relocating to freer pastures. A huge uptick in remote work means many are now seeking larger living spaces to accommodate their new home offices. And as families have spent more time indoors, many are pursuing larger properties with more amenities or more space.
The growth in multi-generational home-buying is one that seems to be a direct result of problematic policies adopted during the pandemic. Many schools have remained closed and childcare has become increasingly hard to come by. Working parents have struggled to juggle their own responsibilities on top of virtual learning — pushing many women out of the workforce all together. Multi-generational homes provide more adults who can watch kids, help them with their school work, and run the household.
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Then there’s the problem with nursing homes. Multiple governors infamously forced COVID-19 patients into nursing homes at the height of the pandemic, leading to disproportionate deaths among the elderly. Even for those fortunate enough to have escaped this horrific scenario, many elderly care facilities have prevented loved ones from visitations. Multi-generational homes provide an opportunity for adult children to look after their parents, ensure they are receiving appropriate care, and spend precious time with aging loved ones.
Annie and Katie Kirking of Seattle are adult sisters in the process of buying a 4-bedroom home in Spokane where they plan to move with their aging parents that they pulled out of an assisted living facility at the beginning of the pandemic along with Annie’s partner and daughter, Evie.
“We’re very grateful that we can do this together,” Annie said. “I can feel pulled between making decisions that are best for Evie and decisions that are best for my parents….Being under one roof, I think that push and pull will be much less.”
Bottom Up Solutions
In short, 2020 was a year of financial woes and unpredictability. Government lockdowns pushed millions of adults out of work and created widespread economic uncertainty.
Many fear the economy will not bounce back all together, and rightfully so given many of the Biden administration’s economic policies. Buying a home with multiple family members provides a more solid economic footing and allows people to spread the increasing costs of a mortgage across multiple income-earners.
This is a positive example of a bottom up solution to top down controls.
When politicians apply top-down solutions to problems they wreak havoc on individuals, owing to what economists call the “knowledge problem.” In the words of F.A. Hayek, “If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them.”
During COVID, we witnessed something different. For the most part, our leaders did not leave decisions up to the people most familiar with the circumstances and instead attempted to micro-manage the lives of millions of people. Predictably, their efforts had numerous unintended and detrimental consequences.
Yet despite government meddling, we are also witnessing a positive economic response in the form of bottom-up solutions occurring at the micro-level. While many Americans have been crushed by the government’s COVID policies, they are coming up with ways to confront the new problems that could have numerous societal and individual benefits.
Multi-generational homes allow families to conserve resources, afford nicer homes, provide more support for parents, and allow children to have closer relationships with their extended family unit. These are communal benefits previous generations benefitted from but that we have increasingly lost as work pulled people further from their family ties.
Thus, while COVID has in many ways upended our way of life, there are many opportunities for us to correct our course in its wake and find new (or in this case old) ways of doing things that produce richer (pun intended) lives. This may just be one such example.
–Foundation for Economic Education | Hannah Cox |Reprinted with Permission