He says it’s different if the client was already planning a move. In that case, the pandemic merely hastened trends already in motion. However, he notes, “If there was no intent to move prior to Covid, I would persuade them to rent for 12 months rather than rush on a purchase. See if the new location really is a good fit for your family and lifestyle before committing to the mortgage.”
Affordability is not always the issue, says Christopher Cortese, a senior financial advisor at Wescott Financial Advisory Group in Philadelphia. Clients “have utilized some of the savings and taken advantage of the lower mortgage rates. Considering rates have dropped fairly significantly during the pandemic, a decrease of 0.5% to 0.75% could mean additional flexibility when it comes to an increased purchase price.”
Jeff Farrar, co-founder and partner at Procyon Partners in Shelton, Conn., says that about 10% of his client base have raised the issue of moving or are actively looking for new houses. (He serves about 50 families, and his firm has 500 or so clients, and the wealth range is $1 million to $20 million).
One of his clients, he says, “is in her early 50s, a single woman in New York City. [She] loves the excitement of New York City, is willing to put up with the high taxes, but lately with Covid, all the excitement is gone and all she’s left with is the high taxes. She’s decided, ‘Hey! I can live in another fun, big city that has lower taxes.” And so she’s looking at Miami, Tampa, Nashville, Atlanta … and she has significant wealth, so she can afford to just pick up and move.”
A similar client of his in New York is looking for a suburban retreat—a second home with two bedrooms that she can escape to. Another set of clients, a working couple in Connecticut with kids in high school, with a wife who works remotely, are asking the question, “What can we afford?” Connecticut had been in a housing slump, a hangover from the last recession, until Covid-19 reversed home price trends there as new residents began to arrive from Gotham (spurring a 4% one-year jump in the value of a typical home, according to Zillow, and inventory squeezes, according to news reports).
Tom Balcom, founder of 1650 Wealth Management in Lauderdale-by-the-Sea, Fla., says appreciating home prices in many areas have allowed clients to lock in profits and make new housing choices where the cost of living is lower or the weather is better. There’s also the appeal of leaving a high-tax state like New Jersey or New York for a no-income-tax state like Florida or Texas.
Christopher Owens, a senior advisor associate with Wealthspire in Potomac, Md., says the big thing nobody’s talking about is that a new home purchase right now is likely driven by an emotional response, specifically fear—and fear is rarely a good starting place for a financial decision. That should give everybody pause.
“This emotional-based decision making can cause people to overlook important aspects of selling and buying a home,” Owens says. “Something for clients to keep in mind: Certain housing markets are hot and inventory is moving quickly, and sellers should pay attention to the markets they’re buying into, which could result in them overpaying for their next house.”
Guay at Rivermark Wealth says that one client was thinking of Lake Tahoe for emotional reasons, and he said that over a series of discussions the weakness of the idea started to present itself and the practical limitations of buying a house where a bubble was forming started to become apparent.
“The whole concept of finding rentals which can be really nice and not just your basic hotel room, that stuff is still there,” Guay says. “You can have all those things you want without making a major financial commitment that you’re probably going to regret.”