Therefore, it may be appropriate for a K-shaped recovery from the COVID-induced recession to be accompanied by an increasingly uneven real estate market. What is less certain is what this would mean for the economy and markets in general.
“I definitely think the pandemic widened the gap between the poor and the poor,” said Glenn Kelman, CEO of Redfin RDFN,
“When I started in this business, there was a broad consensus around making the American dream accessible to middle- and low-income people. After this year, I now see housing as a luxury good ”.
Read: Redfin CEO: Technology is ready to change the way we buy and sell homes
One of the clearest signs of the new wealth is that people with means have been able to go anywhere they want to escape the risks of the pandemic, or even their problems, while the poor have been trapped in their place.
“The clients we serve are people with white-collar professional jobs with big stock market earnings and who are free to work anywhere in the country,” Kelman said. “For them this has not been a catastrophe, but a bonanza.”
Of course, there is a yin and a yang in the house. When people with more means move into lower priced areas, it can help increase property values. But it can also cause cultural difficulties. And Kelman worries that these migrations could simply push up prices everywhere, making it harder for more people to access the housing market, and perhaps the middle-class scale that property represents since for a long time.
“I want to be aware of the affordability issues that this will create,” he said in an interview. “It creates political unrest and anxiety. There’s still no city that has handled it well, but there’s still no city that wouldn’t want to have this problem. After all, you want more people to move to your city, especially people with good jobs. “
Steve Blitz, chief economist at TS Lombard, has a slightly different view of last year’s changes.
“It is the unfortunate aspect of any economic interruption that the top group always manages to make its way with the slightest interruption of their lives and the less fortunate bear the burden. There’s nothing new about that, ”Blitz said.
In addition, he believes that the COVID exodus may end up being a boon for the real estate market and the economy.
Existing homeowners (mostly baby boomers) have been clinging to their homes for years, making younger Americans more difficult to enter the market, Blitz noted.
“And now everything has been shaken,” he said in an interview. “Now that the traffic jam has broken, it will continue. In the last decade, there has been a lack of mobility in terms of people moving to other cities to look for work. More mobility means a better workforce. “
Finally, Blitz points to the well-known boost in the economy for the multiplier effect of home buying: buy at Home Depot HD,
using V credit cards,
more, hiring for well-paid construction work, etc.
Kelman does not discuss the economic impact, but is uncomfortable with the way financial markets have worked for some while others have been closed.
“March 2020 was a calamity,” Kelman said. “Credit markets were about to close and threaten the US economy and a lot of stimulus was put into the system, but only half of America was able to access it. It’s a huge loss of credit. effects for those who have, although there has been a maritime shift in the ability of working people to access credit.We are seeing an increase in so many jobs where it is paid in shares and many of our economic metrics and “People we sell houses to don’t use their salaries, they use their portfolios.”
It is worth noting that the uneven recovery from the fall of the subprime a decade ago, and the response of policymakers, are considered by many analysts to have increased inequality and led to populist trends that helped elect Donald Trump in 2016. .
Related: This graph shows the trends and the poor in the real estate market, and it gets worse
“Before you could do well working hard to afford a home,” Kelman said. “It simply came to our notice then. It is a profound transformation. “
Investors won’t see housing data until the end of the month, though next week’s economic calendar provides an update on consumer price inflation on Wednesday and a first-hand view of consumer sentiment in March on Friday.
Last week, the Dow Jones Industrial Average DJIA,
ended the week with a gain of 1.8% and the S&P 500 SPX,
closed 0.8% higher. The Nasdaq Composite COMP,
it fell 2.1% during the week, but managed to regain positive territory, albeit barely, during the previous year.
See: 16 million people just fired, but U.S. equities have had their best week in 45 years