The Housing Boom Could Continue for Years
Home Prices and Sales Are Climbing
The housing market has boomed in 2020, and analysts say this trend could continue for years to come. Recently, average home prices and sale numbers have reached levels not seen since the 2000s.
In August, the overall US home price average was a record $319,178, up 13% year over year. New home sales exceeded 1 million for the first time since 2006 in August, marking a 43.2% jump from last year.
The Pandemic Is Not the Only Reason for the Boom
Low interest rates are certainly a factor contributing to the boom in demand for houses. Additionally, the COVID-19 pandemic has spurred many to buy homes sooner than they might have otherwise, because they are looking for more room to work and sequester. People are moving out of urban centers like New York and San Francisco and settling in more affordable suburban areas like Phoenix and Boise, and concerns about COVID-19 are a contributing factor for some.
Though the pandemic has been the catalyst for many home-buying decisions, analysts say there are other trends which will continue to fuel demand for housing even after the pandemic subsides. Older millennials, the country’s largest living adult generation, are reaching their late 30s. This is a time in life when it is common for people to become homeowners. For decades, there has been a 20-percentage point gap between the percentage of homeowners under 35 and the percentage of homeowners between the ages of 35 and 44. If this trend continues, a wave of older millennials may be looking to purchase homes over the next five years.
Home prices are climbing because of rising demand coupled with limited supply. Since the global financial crisis of 2008, homebuilders have been reluctant to construct new housing. Yet despite climbing prices, many homebuyers’ monthly payments are relatively small, thanks to low mortgage rates.
The Federal Reserve has promised to keep interest rates at zero through at least 2023, meaning that this trend could continue. Leaders in the real estate industry, as well as homeowners and potential homeowners will be eager to see if demand for housing stays strong in 2021 and beyond.
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Friday Fundings: Allbirds, VTEX, and Rally
Shoe Company, Allbirds Raises $100 Million
Allbirds, which makes soft, comfortable shoes famous for being popular among people working in the tech industry, has raised $100 million in a Series E funding round. The company, valued at $1.7 billion, says it only set out to raise $50 million in this funding round, but it encountered more investor interest than expected. The round was led by Franklin Templeton with participation from T. Rowe Price, Baillie Gifford, and other investors.
The money will be used to open more physical Allbirds stores, invest in direct-to-consumer sales operations, and expand product offerings. Allbirds was founded in 2016 and gained traction with its signature wool sneakers. Since then, it has created a wider variety of shoes, as well as socks and underwear. It plans to design and sell even more products that will be comfortable, sustainable, and functional.
VTEX Raises $225 Million Amidst Booming Demand for Ecommerce
Companies across industries have been scrambling to connect with consumers virtually during the pandemic. VTEX, a company that develops cloud-based ecommerce solutions, is stepping in to help them. VTEX recently raised $225 million in a new funding round which brought its valuation to $1.7 billion. Tiger Global and Lone Pine Capital co-led the round with participation from several other investors.
VTEX got its start helping Walmart with its ecommerce operations in Brazil. Since then, the company has worked with Sony (SNE), Whirlpool (WHR), Coca-Cola (KO), and other big names in markets around the world. Analysts expect that many consumers will stick with online shopping habits they formed during the pandemic, which will mean that demand for ecommerce will continue to rise. For this reason, VTEX may be positioned for even more growth.
Online Investment Platform Rally Raises $17 Million
Rally, a startup with a unique strategy for helping people invest, just raised $17 million in new funding. The company has created a platform on which people who own rare collectables can list items and other people can invest money in them. Rally started three years ago and mainly dealt with classic cars. Since then, it has incorporated wine, sports memorabilia, watches, and other items into its platform.
People can make investments of as little as $1 on Rally and the average Rally investor is just 27 years old. The company reports it has about 200,000 users and transactions on the platform have climbed by about 195% in the past 12 months.