Local Market Monitor, a National REIA preferred vendor, recently released their monthly National Economic Outlook where they share their thoughts on developments taking place in the U.S. economy. Notably, they predict that the population of renters will increase because fewer people will have the financial confidence to buy a home.
National Economic Outlook – March 2020
By Ingo Winzer
March 12, 2020 – Although I’ll quote the latest data on jobs (from February) events have already overtaken the statistics. The spread of the corona virus threatens to have a dramatic effect on the US economy. And not just in the short run because the economy already had been trending downward. That’s the big problem when growth is slow, any number of unforeseen circumstances can tip it into a tailspin.
Although government officials apparently worry mainly about ‘liquidity’ in the banking system and propose financial assistance for companies in some industries, the real problem is that consumers (70 percent of the economy) are quite likely to pull back on their spending habits, which can lead to a vicious cycle of perceived economic insecurity that ends in a sharp recession.
It’s difficult to imagine a quick turnaround from this and I think the effects will be felt in real estate for some years. First, interest rates will be at rock bottom. This means both that investing in real estate will be cheap, and that the returns on rental properties will be better than most other investments. Second, the home price bubbles in a dozen US markets will come to an end, which will encourage more investment in rentals. And third, the population of renters will increase because fewer people will have the financial confidence to buy a home.
Jobs in February were up 1.6 percent from last year, the best performance for months but wasted in the face of the corona situation. Jobs were up 1.9 percent in finance, 2.0 percent in business services, 2.2 percent in healthcare, and 2.7 percent at restaurants. Jobs were essentially flat in manufacturing and retail, and up 1 percent in government. My bell-weather – temp jobs – were down 1 percent, already indicating a slowing economy.Please click here for an expanded look at this month’s National Economic Outlook including very important analysis on how the corona virus might not be the cause but the catalyst of the next recession.
About the Author: Ingo Winzer is President of Local Market Monitor, and has analyzed real estate markets for more than 20 years. His views on real estate markets are often quoted in the national press and in 2005, he warned that many housing markets were dangerously over-priced. Previously, Ingo was a founder and Executive Vice President of First Research, an industry research company that was acquired by Dun and Bradstreet in March 2007. He is a graduate of MIT and holds an MBA in Finance from Boston University. He resides in Cambridge, Massachusetts.