Mindy Cossleworth has been a real estate agent for 25 years, in the Colorado Springs area. We met her at an ‘open house’ for sale in Falcon, Colorado. In between the many who came to see and get an impression, she barely had time to talk to us. “People are not asking too many questions about pricing and facilities, it seems like they just want to buy real estate property under any condition. If this is happening here in little Falcon, I can only imagine the mania around Chicago apartments and L.A. condos,” she said.
On the other side of the country, hundreds are standing in line in St. Albans, Queens, to apply for COVID-19 rent relief. , The state of New York Kick-Started Its Rent Relief Program Last Week and over7,000 have already applied. This program is aimed at helping those affected financially by the pandemic pay their rent, otherwise thousands across the state might get evacuated in the next few weeks
Experts warn of the dangers of this dichotomy we’re witnessing. “I wouldn’t call this a normal market,” commented George Ratiu from Realtor.com, “it is beyond crazy and frustrating”.
Panic In The Market
As investors continue opting the real estate market over other markets, mainly since it had shown relative stability throughout the first year of the pandemic, prices naturally rise all over the world – and especially in North America, which some say is still recovering from the housing crisis of 2008. However, very few have expected the panic for anything immobile to be this vast.
The situation in America’s northern neighbor Canada is no better, and some even say it is worse. Over the past two years, total sales have increased by over 75% across the nation. Right at Home Realty Inc. is one of Ontario’s leading real estate agencies, and according to data it has collected, over half of the people living in Toronto do not believe they will ever be able to buy a house in the city. “With an average detached home price of $1.75 million (and rising), it’s not hard to see why Toronto residents, specifically, are discouraged,” reads the report.
This phenomenon is not limited to the housing market. According to the top hospitality website Hospitality Net, there is increased investor interest in owning hotel apartments. Skyline Investments, a North American hotel and resort owner and operator focused also on the development of destination communities and controlled by the real estate investment firm Mishorim, has reported data confirming this claim.
“We’ve been operating in this market since 1998, and never have we seen such high demand for apartment hotels by both investors and families within our Ontario properties,” said Alex Shnaider, the Canadian businessman behind Mishorim. “Investing in hotel real estate is a trend that actually started in the United States,” added Jason Jacobs, director-partner of the real estate investment firm REALIS. “Today, you can get your own hotel room from $150,000 – a price that is really low if you consider the returns.”
Growing Inequality
The real problem seems to be not the absurd prices in the buying market, though, but rather the dramatic rise in rent, as costs are passed on to the tenants renting these properties, a majority of them people who work hard to make ends meet. State governments, alongside the Biden administration, have issued several aid and relief programs similar to the New York model , but their ability to pull millions of Americans out of the mud remains questionable.
Earlier this year, the government had distributed close to $25 billion for this cause, but due to bureaucracy, a large portion of this money is not reaching the right destination. While officials and administrators argue about distribution methods, millions are at the risk of being evacuated immediately, like Florence from Kansas City. “I went to some office in the city which I was told to go to, and they said that they’re still working on my documents or something like that,” she said angrily. “That doesn’t interest my landlord, who keeps knocking on my door every evening, and I’m scared he’s going to lose his patience one day and kick me out.”
The Way Out
It seems there is no short-term solution in sight, apart from a significant improvement of aid distribution methods. With that in mind, it is time to think about the long term. Many are already claiming that deregulation is the cure, and that it will lead to a rise in supply of residential space, therefore simmering down the demand. On the other hand, investors are a big part of this market, and they are not settling for just one apartment.
This notion has led to an exact opposite approach – is it possible to put a stop to the frenzy by taxing properties purchased by those who already own a home? Can the liberal United States (and Canada) do the unexpected and so boldly intervene in the market? This method has brought limited success in other regions around the world, but for people like Florence, limited success in real estate price reduction is much better than the current situation.