Key Highlights

  • Record-low inventories, rising demand and higher prices strengthen argument for renting in 2021
  • Economic activity may be dominated by growing immunity and easing fears as vaccines roll out

The COVID vaccine is coming – the COVID vaccine is coming – and with its coming, the W-shaped economic recovery may turn into a V-shaped economy in areas hardest hit by the pandemic. Though business travel and going-into-the-office may be up in the air for months, analysts are predicting unemployment numbers to fall and demand for travel and leisure activities to rise as more and more people will likely be vaccinated (Goldman Sachs forecast 50% of Americans by May).

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Meanwhile, the housing market, in the midst of a raging pandemic, has reached all-time highs on many fronts. The downside of those highs is an all-time low…inventories of existing homes fell to 2.5 months in October and 3.3 for new homes. According to real-time data from Altos Research, for-sale inventories are down more than -40% y/y…the reasons homebuilders’ sentiment is at all-time highs and home price growth, already at an all-time high, continues to accelerate.

With less COVID fears, potential buyers and sellers may have vaccine-driven confidence to become real buyers and sellers. This may mean that, with expired eviction/foreclosure moratoria, inventories may, in fact, increase.

But let’s say that home prices are +12% higher in Q2 2021 than at the end of 2019, apartment rents have fallen off a cliff in many high-cost cities such as San Francisco and New York City. Can the potential buyers who haven’t yet taken the plunge actually afford making down payments for suburban homes having elevated prices and almost requiring bidding war participation in order to “score?” Or, does it make more financial sense for those potential buyers to rent for a period of time while rental prices are at such discounted levels?

According to Connor Sen, an opinion writer for Bloomberg and contributor to The Atlantic and Business Insider, “the base case next year should be a historically strong first half for the housing market, fueled by crisis-level inventories, low interest rates, a post-vaccine economic boom and a demographic tailwind from family-forming millennial households. This will be welcome news for the economy – unless you’re looking to buy.”


Thanks to Bloomberg.

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