Social distancing in the COVID-19 era is much easier for homeowners when their next-door neighbor is a mile away. That's why some buyers who have the means are looking outside of the cities, past the suburbs, and into states that offer bigger homes with plenty of wide open spaces.
It used to be that a short work commute was on the wish list of many homebuyers. But now that so many professionals are working from home -- or vacation homes -- for the foreseeable future, close proximity to the office is no longer a pressing issue. Many buyers who have the budgets for larger primary residences or secondary homes are looking to move out of the big cities, an internet connection serving as their link to their offices.
Open spaces are luring luxury buyers
With a population of just under 1,069,000, Montana has long been a haven for people on the West Coast looking for more breathing room. Compare that to Los Angeles' more than 10 million residents and New York City's densely populated boroughs with over 8.3 million, and it's no wonder that some want more square acreage than square footage. A big backyard with a pool and patio might be the amenity of choice in the suburbs, but in Big Sky Country, it's fish ponds and horse ranches.
Engel & Volkers Western Frontier is a luxury real estate firm in Missoula, Montana, that launched a marketing campaign back in March to woo out-of-state buyers to purchase large properties where social distancing won't be an issue. It worked: The firm is having a record year, and it signals a growing trend in Montana and other less populated states. According to the Federal Housing Finance Agency's (FHFA) Housing Price Index Quarterly Report for Q3, Montana saw a 9.92% increase in housing prices from last year, putting it at number 6 on the state list. The top five states are Idaho (14.36%), Arizona (11.08%), Washington (10.8%), Utah (10.66%), and Tennessee (10.02%).
Tight inventories are driving seller's markets
On the East Coast, Maine has been on the radar of those looking to escape cramped city life during the pandemic. Indeed, according to the FHFA report, home prices are up 8.7% in Maine, whose population is about 1,344,000. The state is seeing an influx of buyers from New Hampshire, Massachusetts, Connecticut, New York, New Jersey, Florida, and even California, according to one report.
In September, Maine home sales were up 23% compared to the same month last year. A tight inventory is driving up the prices, which is good news for sellers, who are taking advantage of low interest rates. But the buyers are mainly out-of-state buyers with big pockets; in fact, in September, 736 home sales were by out-of-state buyers as opposed to 445 last September.
Maine's real estate market is definitely hot for sellers, but the increased interest from out of state is not helping Maine residents who want to become homeowners. In 2019, it was reported that 56% of Maine residents couldn't afford the median home price tag of $225,000.
The bottom line
Although a vaccine is coming, we will be feeling the effects of the pandemic well into 2021, which includes the need for continued social distancing. Whether homebuyers are looking to make a big move or buy a secondary home for a spacious retreat, luxury markets in less-populated areas will continue to thrive.