via mattjouff
I will preface this by saying: I have absolutely no data on this, I am simply going on logic on anecdotes, but I am interested to see if anyone else has stories or experiences that corroborate this.
Here is my thesis: There is a growing silent pile of over due maintenance across US real estate that is going to hurt RE prices in the next 5-10 years. This is due to the more recent explosion in labor costs, and maintenance costs specifically.
The interesting part is this has already contributed to tanking the condo market: when Florida passed that law forcing HOAs to do over-due maintenance, they had to increase the fees considerably to cover the inflation in maintenance costs. In this case, the law forced the cost to come out all at once, mostly because HOAs were not super incentivized to be pro-active before.
But privately owned single family homes are a different story: People generally want to take care of their property so it maintains its value. Except that when the labor to repair your moldy wall, change your HVAC, or furnace exceeds the mortgage you pay in a year, you start to find excuses to delay these fixes as much as possible.
I’ve been lurking in RE subs, and one thing I’ve noticed is people complaining more and more about houses on the market that look good (fresh coat of paint, millennial grey vinyl flooring, granite countertops etc.) but after digging a bit, are on the verge of requiring five, sometimes six figures wort of maintenance and repairs.
So my thesis is that the post-covid explosion in labor inflation (which is not completely captured by CPI data because these numbers get diluted by all the cheap manufactured goods) is causing massive delays in home repairs, delays which the RE market is not yet pricing in. I don’t think there will be anything spectacular as a result of this. My prediction, if this effect is of any consequence at all, is that people will be especially on the lookout for these delayed repairs during the closing phase, and better educated about the real costs. This will put a steady downward pressure on the RE market for the next 5-10 years, or until the RE and labor market normalize.