So it may be appropriate that a K-shaped recovery from the downturn caused by COVID would be accompanied by an increasingly uneven housing market. What is less certain is what that will mean for the wider economy and markets.
“I certainly think the pandemic has widened the gap between the haves and the have-nots,” said Glenn Kelman, CEO of Redfin RDFN.
“When I started in this business, there was a broad consensus about making the American dream accessible to middle- and lower-income people. After this year, I now see housing as a luxury good. “
Read: Redfin CEO: Technology is finally ready to change the way you buy and sell your home
One of the clearest signs of the new prosperity is that people with resources can go anywhere they want to escape the risks of the pandemic, or even the doldrums of the pandemic, while ‘not’s’ are stuck.
“The clients we serve are people in professional white collar jobs with huge stock market profits who are free to work anywhere in the country,” said Kelman. “For them this has not been a disaster, but a bonanza.”
Sure, there is a yin and yang to housing. When people with more resources move to cheaper areas, it can help increase property values. But it can also lead to difficult cultural calculations. And Kelman is concerned that such migrations could simply push prices up everywhere, making it harder for more people to access the housing market, and perhaps the ladder into the middle class that home ownership has long represented.
“I want to be aware of the affordability issues this brings,” he said in an interview. “It is causing political unrest and anxiety. There is not yet a city that has done well, but there is not yet a city that would not like to have that problem. Ultimately, you want more people to move to your city, especially people with good jobs. “
Steve Blitz, chief US economist for TS Lombard, has a slightly different view of the shifts of the past year.
“It is the unfortunate aspect of any economic disruption that the upper segment always manages to make their way with minimal disruption to their lives and the less fortunate bear the burden. That’s nothing new, ”said Blitz.
In addition, he thinks COVID’s exodus will ultimately be a good thing for the housing market and the economy.
Existing homeowners – largely baby boomers – have been clinging to their homes for years, making it harder for younger Americans to enter the market, Blitz noted.
“And now everything has been shaken up,” he said in an interview. “Now that the wood blockage has been broken, it continues. Over the past decade, there has been a lack of mobility in terms of people moving to other cities for work. More mobility means a better workforce. “
Finally, Blitz points to the well-known boost to the economy from the multiplier effect of buying a home – shopping at Home Depot HD,
with credit cards V,
more, recruitment for high-paying construction jobs, and so on.
Kelman doesn’t dispute the economic impact, but he’s uncomfortable with the way financial markets have been operating for a while, while others are left out.
“March 2020 was a disaster,” Kelman. “Credit markets were on the verge of closing and threatening the US economy and a tremendous amount of stimulus was put into the system, but only half of America had access to it. It’s a huge windfall for the haves, even as there has been a tremendous shift in the working class’s ability to access credit. We’re looking at the rise of so many jobs where you are paid in stock, and many of our financial and economic statistics don’t even take that into account. The people we sell houses to don’t use their paychecks, they use their wallets. “
It is worth noting that the uneven recovery from the subprime crisis a decade ago, and policymakers’ response to it, is seen by many analysts as greater inequality and as a trigger for the populist tendencies that contributed to Donald Trump’s election 2016.
Related: This chart shows the haves and have-nots of the housing market, and it’s getting worse
“You used to be fine working hard to pay for a house,” said Kelman. ‘I think that will change. This is a major transformation. “
Investors won’t get a look at housing data until later in the month, though next week’s economic calendar provides an update on consumer price inflation on Wednesday and an early look at consumer confidence 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,
fell 2.1% this week, but managed to scramble back into positive territory, if barely, for the year to date.
See: 16 million people have just been laid off, but US stocks had their best week in 45 years