This economist bought and sold houses. What does it say about the housing market?

Even economists buy and sell houses.

Brian Albrecht, chief economist at the Center for International Law and Economics, and his wife bought a house site sight unseen over a weekend and sold their house within a week.

“We were in a rush to put our house on the market,” said Albrecht, who sold a rural home on the St. Croix River in Minnesota. .

Buying a house was also a competition. The family visited their future home via FaceTime from Georgia, where Albrecht, now an assistant professor on leave, teaches economics at Kennesaw State University. The home, near White Bear Lake northeast of St. Paul, is close to amenities such as daycare and preschool.

In addition to his work at the Center for International Law and Economics, Albrecht co-published with University of Mississippi economist Josh Hendrickson. Economic forces. They write about how supply and demand affect prices in different markets.

Albrecht spoke. Baron About his experience as a home buyer and seller, as well as his perspective on the market. An edited version of our conversation follows.

Baron: What is your home buying experience like? How quickly did you make an offer on your new home?

Brian Albrecht: We visited four houses, made offers on two, and the second offer was accepted.

The house was on the market Friday morning. They took the weekend deals and visited on Friday, Saturday and Sunday. All offers had to be received by Sunday night and they made a decision on Monday morning. This was also true for the other three houses we visited.

There was some back and forth with the other realtor about other offers, but we came up with a higher price and didn’t get into a bidding war. We have left our inspection which is providing the best efficiency.

Homes in White Bear Lake, a St. Paul suburb near where the Albrechts moved. The area is close to amenities such as daycare and preschool.

Photo by Ackerman + Gruber

How does your offer compare to the list price?

We came out -$53,000 over the listed price. List price is not what you worry about as a buyer; You worry about the competition. I am not competing with the list price. I’m competing with other people who are trying to buy. I think the important thing is where other people are bidding.

I wrote a newsletter about this, “There’s No Such Thing as Supply.” It is a collection of buyers bidding against each other. If someone came to my house and gave me a million dollars, my family would be out of it in a day.

Are your newsletter readers asking about the housing market?

I get questions about major markets people are concerned about—gas, interest rates, housing. It’s definitely one of the things on people’s minds. Everyone knows someone who has tried to buy a house and failed. People care about housing because it is an integral part of their lives.

How successful was your sales process? How long did you expect the process to take?

We were optimistic. Every home we heard sold quickly. Being rural, we knew our situation was different. Many of the truly extreme housing market stories we’ve heard have been in cities or suburbs, or with newly built homes. This was a 1950s house in the woods; It wasn’t San Francisco.

We thought it would be about the weekend and then we would receive an offer. It took a few more days after things cooled down. We were aggressive on the list price, and two offers came in around $25,000. Two offers are not a ton.

But within a week we were listed and accepted. It wasn’t quite as tight as it was when we bought it, but in the scheme of things, it was still very, very tight. Many homes are still under contract in two weeks, which is a big change from when we bought the home in 2019.

[Editor’s note: Redfin data show that the percentage of sellers who accepted an offer within the first two weeks of putting their home on the market was 56% in May and 41% in July. That figure was around 30% for much of 2019.]

View of White Bear Lake in Minnesota on a Thursday in July.

Photo by Ackerman + Gruber

Your new home is in an urban area. What is the market situation like in metropolitan areas?

During the Covid-19 pandemic, prices have risen as people return to the city after leaving earlier. The advantage of being on the margins, in the suburbs or in the countryside [during economic lockdowns] It was higher than in the city. Without any restaurants or nightlife, New York City just isn’t the same.

In the long run, supply will have to respond: people will have to build more houses. But it is difficult to build in cities, especially in cities with many zoning regulations. Those regulations make it difficult, if not impossible, to build more housing.

And by house I mean the ability to house many people. Converting single-family to eight-person apartments means building more houses because you’ll have more rooms for people. In many cities it is illegal to do so.

The city of Minneapolis I know has eliminated single family zoning in the city. Now that is being argued in court.

Mortgage rates are much higher than they were a year ago. What did that bring to the market?

Any time interest rates rise, demand tends to shrink, which is what we’ve seen over the past few months. [Editor’s note: The seasonally adjusted annual rate of existing-home sales has fallen from 6.5 million in January to 5.1 million in June.]

[Rising mortgage rates] It was one of the reasons we rushed to put our house on the market. What may seem like a small increase can have a big impact on your loan payments.

If the US economy goes into recession, what does it mean for the housing market?

A recession reduces demand. If you’re worried that you might lose your job in six months, do you want to be on the hook for an expensive mortgage? If you’re worried that a recession is coming, you may be giving up. [to a bigger home]. Any general uncertainty about things reduces interest.

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