Parents Fleeing Public Schools... What will that mean for Real Estate Values?

The COVID-19 pandemic seems to have been the proverbial "last straw" for many parents regarding public schools. Public schools have long been in decline in the USA and now with COVID protocols and remote learning, mask mandates, and all of the other knee jerk reaction to this pandemic, many parents find themselves home-schooling or paying for private school. The numbers are actually a bit shocking in a state like Washington that has some of the best public schools in America.

Many Clark County school districts are seeing significant enrollment reductions despite massive growth in local population. As is seemingly true with all government entities, they rarely see it coming and often are too sloe to react. School districts are directly funded on a per student basis. District leadership continues to bludgeon parents with unpopular changes to teaching curriculum and a sizable percentage of the public is fed up.

Parents want their students to get an education, in elementary school a rounded mix of English, math, and science as a base for secondary schools where more sophisticated concepts can be introduced. Our schools seem to be off the rails with politics mixing in. There is no place for partisan politics in our public schools, yet they seem to be there anyway. Parents are clearly frustrated and not just one side of the political isle, this has become an almost unifying issue.

So what does this mean for real estate values? There are several areas here in Clark County where neighborhood values are higher largely due to the presence of highly rated public schools. I have often argued that the difference between the best and most popular schools and the least popular is pretty minimal. Washington has an iron clad constitutional mandate to keep all public schools well funded. But that doesn't stop people from paying a premium for neighborhoods with well reviewed schools or districts that have more premium infrastructure.

Parents seeking the best public schools are probably the same parents now making alternative education decisions. Property values that have been driven up over schools could see a slowdown in popularity as parents decide to buy a in a less expensive neighborhood and home school or send the kids to private school. The data is in and it is clear that in person instruction is very important to developing children academically. Hopefully the idiots running the schools at the state level will realize this before the schools suffer tremendous funding shortfalls. 

In the mean time, why would a family pay an exorbitant premium for a particular school district if they are not going to send their kids to those schools anyway. That may spell trouble for those neighborhoods over the next few years.

Local Market Remains Hot

Yes the headlines are mostly true, the real estate market continues to see strong sales and demand is still outstripping supply. A lot of this locally can be partially tracked to the new home construction which is suffering from supply chain woes. Nearly a thousand resale homes closed in July this year and that is getting into the numbers we saw at the peak of the last big bull housing market in 2007. 

Buyers can at least take solace in the inventory numbers that are softening a bit. Instead of ten multiple offers on the three-two with a yard for $400k there might only be five. Of course many sellers are opting to take a more leisurely approach to selling with a higher price intending to bring the buyer that really wants the home rather than the mad rush desperadoes trying to edge each other out.

The extra inventory is appreciated but the market will still gobble it up. There are a fair number of locals moving out of the area, chasing jobs in markets where COVID is not as restrictive on the factories, and supply chain. Texas is a big recipient of this minor exodus. Locally the housing is rapidly being bought by others moving in. We are starting to fill up with Seattle area transplants working from home and taking advantage of Clark Counties relative value when contrasted with King or Snohomish counties. That and all the Portlanders fleeing that rapidly declining city to Clark, Clakamas, and Washington counties.

The next 6-12 months look solid for Clark County real estate. 

 

Inventory Finally Showing Up

Inventory pressure is finally started to lighten up a little. New construction is booming but a labor and materials shortage is keeping things moving at a slower pace than demand. This of course puts pressure on the resale market as more sellers realize they have the upper hand. 

Most people have been sitting on their homes, perhaps the fear associated with the pandemic or the where will I go question that looms over many potential sellers. Whatever the underlying cause, the market is seeing a welcome bump in inventory.

That mentioned, we still have a low supply and multiple offers are still the typical situation on any home under $1,000,000 that is priced properly. So buyers you can't quite relax yet. The good news is that most analysts are still mildly to moderately bullish on real estate through the 2nd quarter of 2022. 

What might put the brakes on a roaring industry is inflation and potential rate hikes that typically arise during heavy inflation cycles. Projections for the rest of this year are almost "Jimmy Carter " levels of inflation. Buyers in contract now should have a solid 1st year of appreciation. I'd like to think the fed has learned how to keep interest rates in check but they still can't continue to pump cheap money into the economy. At some point rates will creep up.

Rates have been stupid low for several years now. It would be heathy to get back into more normalized rates in the 5's or 6%. That would trim a lot of buyers out of the market though. Getting in while rates are low and locked in on a 30 year at 3% is beneficial in a potentially rising rate economy.

There is a silver lining to the dark cloud hanging over buyers.