Existing home sales hit highest level since 2006

Yahoo Finance’s Alexis Christoforous, along with Dolly Lenz and Jenny Lenz of Dolly Lenz Real Estate, discuss the pandemic impact on home sales.

Video Transcript

ALEXIS CHRISTOFOROUS: The sales of previously owned homes rose in 2020 to the highest level in 14 years. At the same time, home construction is booming as contractors race to replenish inventory. And of course, ultra low mortgage rates and this trend-- this work from home trend continuing to fuel demand for homes.

Joining me now is Dolly Lenz. She is CEO of Dolly Lenz Real Estate. And Jenny Lenz, managing director at the firm. Hello to you both. And thanks for being with us. Dolly, I want to start with you. I know we're only a few weeks into the new year, but are there signs that the torrid pace of sales will continue in 2021?

DOLLY LENZ: I think it will definitely continue in 2021. And it is still, though, a tale of many markets, right? So some markets are very hot. First-time home buyer market is very hot. The ultra luxury market is very hot. But that middle market? Not so hot. So those people hopefully will get into the game. And that will fuel the next big wave.

JENNY LENZ: Right, but on the luxury sector, especially in New York City and the Hamptons, we've been seeing a lot of big ticket sales. So we just saw yesterday Barry Sternlicht from Starwood Capital, where he sold his home for $41 million when he just purchased it a couple of years ago for $34 million. Similarly, Tom Brady and Gisele, another celebrity couple, sold their home for an astronomical price.

And you also had the most recent $50 million sale in Bridgehampton. Michael Rubin from RueLala and Fanatics purchased that. So you are seeing very big ticket sales. Like you said, the stock market is at an all-time high. And people are looking to take a little bit of money off the table.

DOLLY LENZ: Yeah, perfect storm.

ALEXIS CHRISTOFOROUS: Yeah, no, I have to say, for a lot of folks hearing those astronomical prices, are going, you know what? Great for them, but I can't afford to buy a house. I mean, last year, the median price I think for a home in this country surpassed $300,000 for the first time. Dolly, are there signs that prices might start to come down? It's hard to think they will, given the fact that we have this inventory squeeze right now.

DOLLY LENZ: Well, the inventory squeeze will hopefully be taken up by the housing starts, right? Housing starts are up 27.8%. So that should help put product in the pipeline. And that will definitely keep prices up, though. Because those are new homes. They're going to be expensive. I don't see it not lasting, unless interest rates drop, which is not expected-- rather, go up, which is not expected. Interest rates just went up just a drop. But they're not expected to go past 3%, which is all-time lows. And that will keep the market hot.

JENNY LENZ: Right, so the first-time homebuyers can't afford the payments on their mortgage, which is really a big deal. But like you said, the median home price is, for the first time ever, above 300,000. So that's going to keep a lot of people renting and not buying.

DOLLY LENZ: And renters are getting great concessions in big cities at least now, right? Because they're empty. So landlords have to fill up the buildings, and they're giving you three months free rent, free health club, free this, free that. So that's going to keep also everything fluid.

ALEXIS CHRISTOFOROUS: Right, you talk about the big cities. We keep hearing throughout this pandemic it's the death of the big cities. New York is not-- New York among them, not going to be able to come back. I know a lot of the business you do at Dolly Lenz Real Estate is in the New York area and the surrounding area. Are you seeing that in your business? Are people continuing to flee the big cities at the rate they were earlier in the pandemic?

DOLLY LENZ: You know, they're not fleeing at the same rate, but they are fleeing. Look, taxes are very compelling. And people are realizing maybe I can work from home a little bit, if not 100% of the time, 60% or 80%, so I can have a home outside the major drag, right?

JENNY LENZ: Right, especially since nothing's going on in New York City and other main metropolitan areas right now. There's not much to do, so like I said, people are fleeing to the Hamptons. Because of taxes, people are fleeing to Florida and Texas. But at the same time, we do see New York City coming back at some point once things reopen. Headwinds, though, include a foreign buyer tax, which lawmakers are talking about now, that any home around $5 million or above, if you don't consider New York City your primary residence, they're going to tax you. They haven't really come up with what amount yet, but that would really, really hurt New York City.

DOLLY LENZ: Yeah, and similarly, other taxes. They've just raised real estate taxes. That doesn't help. You know, there's so many things, as Jenny said, that are headwinds for New York City, although I think New York City is doing really well, considering all issues.

ALEXIS CHRISTOFOROUS: Where do you see the New York City real estate in the next five years? I mean, because from what we're saying here, I would think a bunch of people are just going to be priced out of this market if they haven't been already.

DOLLY LENZ: Well, really, a lot depends on foreigners, right? So until-- just this year, we haven't had almost any foreign sales. Obviously, there's no travel. People don't like to buy things sight unseen completely. So that's an issue. If foreigners don't come back into the market, I'd say a lot of the big city markets, New York City, San Francisco, perhaps some in Los Angeles, will not do well. But if the foreigners are able to come back in, so the dollar dumps or continues to dump, and foreigners are able to get a deal and come back in, then I think they can save us yet again, right? One foreign group or another will be there to save us in New York.

JENNY LENZ: And like after September 11th, it took a while for New York City to come back. But we think it will come back in a couple of years in the same way.

DOLLY LENZ: Yeah, so we're thinking a five-year outlook is good. The two-year outlook is not quite as good.

ALEXIS CHRISTOFOROUS: When does this thing get flipped on its head, and what does it become a buyer's market? Because it looks to me like it's going to be a seller's market for the foreseeable future. I mean, we're getting these bidding wars for a smaller number of homes on the market. So when does this become a buyer's market?

DOLLY LENZ: Well, with some events, right? So either that's an interest rate event. That's banks pulling back on getting financing event. That's another pandemic, or God forbid, other horrible event. That's when things can pull back. But otherwise, look, millennials-- and Jenny's in this group-- have just hit record levels of purchasing. Jenny just bought an apartment. Her friends and her clients and her colleagues are all buying apartments. This is a huge group of people all entering the buying force at the exact same time.

JENNY LENZ: Right, and about 5 million millennials turned 30 last year. So that's about the time you start thinking about settling down and buying a home. So that's always good. There's a lot of demand. And like we said, money is cheap. They can make their mortgage payments. And negotiability of property is high in certain areas.

DOLLY LENZ: Right, well, major metropolitan areas anyway. Right, not in the first-time homebuyer more suburban areas at this time. But everybody wants to buy. They want a piece of the dream. And I think that's what's fueling it. And they're finally able to see interest rates low enough. Buy versus rent makes sense. I'm going to buy. I'm sticking my toe in because I know that toe is going to go further three years, five years, eight years from now. And the stock market's all-time high, too. So what do you do with your money? Everything's all-time high.

JENNY LENZ: Right.

ALEXIS CHRISTOFOROUS: Right, right. Hey, guys, before we let you go, I just have 30 seconds. In case you're all wondering, Jenny is the daughter of Dolly, and they look a lot alike, too. So no big surprise there. But you know what they always say. You be careful about working with family. Things can get really sticky. What's it been like for you, Jenny, going to work and working with mom every day?

DOLLY LENZ: Oh.

JENNY LENZ: We're very, very close. We're very lucky. We actually work very differently. I'm more into the nitty gritty. And I would say my mom is a big picture person, so it actually works well. But I would say, definitely, you have to have a good relationship at home, which we do. And yeah, it's honestly really fun. She has my back, no matter what. And we trust each other implicitly, so.

DOLLY LENZ: Yeah, and vice versa. She has my back. We know what to say, what not to say, what to do, what not to do. And we're both also very in the box, very proper. And I think as long as you both look at it that way, it works.

ALEXIS CHRISTOFOROUS: Make a good team. Dolly Lenz, Jenny Lenz of Dolly Lenz Real Estate, thanks so much for being with us.

DOLLY LENZ: Thank you. Congrats on your new show. It's great. Thank you.

ALEXIS CHRISTOFOROUS: Thanks a lot, guys. Appreciate it.