So it might be appropriate for a K-shaped recovery after the COVID-induced recession to be accompanied by an increasingly unequal real estate market. What is less certain is what this will mean for the economy and wider markets.
“I certainly think the pandemic has widened the gap between those who don’t and those who don’t,” said Glenn Kelman, CEO of Redfin RDFN.
“When we started this business, there was a broad consensus that the American dream should be accessible to middle- and lower-income people. After this year, I now see housing as a luxury. ”
Read: CEO Redfin: Technology is finally ready to change the way you buy and sell your home
One of the clearest signs of the new wealth is that people with the means have managed to go wherever they want to escape the risks of the pandemic, or even its depletion, while those who have not been have been blocked in their place.
“The clients we serve are people with white-collar professional jobs, with massive earnings on the stock market, who are free to work anywhere in the country,” Kelman said. “For them, this was not a catastrophe, but a bonanza.”
To be sure, there is a yin and a yang in the houses. When people with higher means settle in areas with lower prices, it can help increase property values. But it can also lead to difficult cultural calculations. And Kelman worries that such migrations could simply push prices upward everywhere, making it more difficult for more people to access the real estate market and perhaps the middle-class scale that home ownership has long represented. .
“I want to be aware of the accessibility issues that this will create,” he said in an interview. “It creates political unrest and anxiety. There is still no city that can handle it well – but there is still no city that does not want to have this problem. At the end of the day, you want more people to move to your city, especially people with good jobs. ”
Steve Blitz, chief American economist for TS Lombard, has a somewhat different perspective on last year’s changes.
“It is the unfortunate aspect of any economic disturbance on which the upper end always manages to make its way with a minimal interruption of their lives and the less fortunate carry the burden. There is nothing new about that, “Blitz said.
Moreover, he believes that the COVID exodus can actually be a good thing for the real estate market and economy.
Existing homeowners – mostly baby boomers – have been clinging to their homes for years, making it harder for younger Americans to enter the market, Blitz said.
“And now everything has shaken,” he said in an interview. “Now that the log block has been broken, it will continue. The last decade has seen a lack of mobility for people moving to other cities for employment. More mobility means a better workforce. ”
Finally, Blitz highlights the well-known boost to the economy from the multiplier effect of home buying – shopping at Home Depot HD,
using V credit cards,
moreover, hiring for well-paid jobs in construction and so on.
Kelman does not dispute the economic impact, but is concerned about how financial markets have worked for some, while others have been ruled out.
“March 2020 was a disaster,” Kelman said. “Credit markets were about to close and threaten the US economy, and a massive amount of incentives were introduced into the system, but only half of America was able to access it. It is a huge heart for those who have had, even if there has been a big change in the ability of working class people to access credit. We look at the growth of so many jobs where you are paid in stock and many of our financial and economic values don’t even matter. The people to whom we sell houses do not use their salary, but use their portfolios. ”
It is noteworthy that the uneven recovery from the subprime bust a decade ago and the response of policy makers to it is considered by many analysts to have increased inequality and given rise to populist tendencies that helped elect Donald Trump in 2016. .
Related: This graph shows the presence and absence of the real estate market and is getting worse
“Before, you could do well working hard to afford a home,” Kelman said. “It simply came to our notice then. This is a profound transformation. ”
Investors won’t take a look at housing data until later in the month, although next week’s economic calendar brings an update on consumer price inflation on Wednesday and an early look at 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. Nasdaq Composite,
it fell by 2.1% for the week, but managed to return to positive territory, even if only for the year so far.
See: 16 million people have just been fired, but US stocks have had their best week in 45 years