What to do in a real estate boom

If you are trying to determine where you want to live, the last year has been confusing. Every boom in the housing market makes homeowners feel rich, and house hunters feel terrified, but the mood swings of this time are extreme by any standard. As an architect who has been through multiple booms and busts in the housing market in the last forty years, there are some baseline truths you can apply to all your options. But this moment of flux is different from the last For the decade after the 2008 Great Recession Real Estate Crash, Connecticut had a slow but stable housing market. Renting, buying, selling and building values were relatively predictable. But then something happened. COVID-19 did not end, but our domestic desires, denied for over a decade, were clarified by our sequestration. As you might expect, construction costs are now insanely high as well, as pandemic supply chain and labor issues have meant that building anything is harder. Some are leaving cities as working from home has ended any commute. This pandemic happened during a huge demographic of aging Baby Boomers, who are empty nesting a downsized future. As with each new home searching generation, millennials are all seeking places to live, too. Essentially, you can buy a new home, sell your old home, rent a place to live, change the place you now own or build a new house. Each option has positives and negatives. In the present state of flux in the residential market, before the end of the pandemic.

Here are the bullet points of each option:

Buying a new home

First, homes under 20 years old have a premium value, so they cost more, and should require lower costs to heat, cool and maintain until they reach “middle age” (over 30 years old). Older homes often have better located sites and better outdoor developments (trees, gardens, even neighborhoods), but they are often ticking time bombs of future, unavoidable costs and pain in fixing what breaks. Now, the looming increases in mortgage rates, local taxes, utility costs all play into what you can look at.

Selling your home

When homeowners discover their home, even if purchased at the height of the last boom (20052008), is worth a great deal more than it ever was, the typical question is: “But where would I move?”

That question should be answered before your home is on the market. Even in a boom, making a home ready for showing, then removing years of accreted things is a true pain. There is also a simple truth: you cannot create history, so if there is value in your home’s history, neighborhood, site it is not simply made by you in a new home.

Changing your home

As previously mentioned, construction costs are at historic highs. Building during construction is difficult, but simple add-ons are easier — though more expensive than simple wall removal. Any renovation that involves a new bedroom has large septic implications, as most Connecticut homes have septic systems not sewers. You need to know that architects help and empower you, but cost money; ask questions and take time to explore and implement. You may want to get to know the rental market, as it is changing, too.

Building a new home

All the uncertainties of the other scenarios are at a higher risk factor when you build new. Some people opt to go with a developer or builder, and not go through a design process that leads to bids and construction. And like buying a new home, the site’s landscape, community and environment is crucial. But the huge benefits are simple: you have control in what you decide to build, and it is brand new — and since you visit the site, versus live in it during construction, you can have a terrific experience over the two years (give or take) the process takes. In every scenario, know that you are in control, not the market. In a boom there is an explosion of Real Estate Brokers all seeking commissions. But like builders and architects, there are professionals that are there to help you, not make the sale. But you need to find them, as in times like this building boom, they are surrounded by those who are rushing to take advantage of our “irrational exuberance.”

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