August 2021 Trends and Indicators Report: US Economic Status Report

Where is the United States’ economy heading? The combination of a booming stock market, extremely low interest rates, once-called transient inflation that is becoming increasingly sticky, a continuing global health crisis, and increased instability in the Middle East is creating a juxtaposition of opportunity and chaos. 

Many indicators suggest a cooling of *some* markets, like The Hamptons and Los Angeles, though Palm Beach and Miami show consistent strength. As a nation, we are still need 2.5 million more housing units, with Florida, California, Texas, Oregon, Colorado, and Minnesota leading the pack in terms of shortages.

Housing Shortage

The shortage is a continued opportunity for builders, though housing starts nationally sank 7% to a seasonally adjusted annual rate of 1.543 million units in July of 2021, well below market forecasts of 1.6 million. It is the lowest reading in 3 months, hurt by rising construction costs and home prices. Single-family housing starts fell 4.5% to a rate of 1,111,000 and those of buildings with five units or more dropped 13.6% to 412,000. Starts declined the most in the Northeast (-49.3%), the West (-11.3%) and the Midwest (-6.9%) but rose 2.1% in the South

End of Eviction Moratorium

On August 26th, the Supreme Court ended the eviction moratorium with a majority opinion saying that the Centers for Disease Control and Prevention had exceeded its authority by imposing the “nationwide moratorium on evictions in reliance on a decades-old statute that authorizes it to implement measures like fumigation and pest extermination” thus crippling many landlords by saddling them with billions in collective debt stemming from unpaid rent. Congress had declared a moratorium on evictions at the beginning of the coronavirus pandemic, but when it lapsed in July 2020, the CDC then issued a series of its own moratoriums, saying that they were justified by the need to address the pandemic and authorized by the Public Health Service Act of 1944. Despite the end of the federal moratorium, many states and localities, including New York and California, have extended their own conditions, causing confusion among renters.

Most Expensive City Shift

New York City has now dethroned San Francisco as the most expensive city to live in the US, despite an increase in homelessness, violence, and the distribution of COVID 19 rent relief packages. The average monthly rent of a one-bedroom in all of New York City is $2,810, with Manhattan seeing an average increase $60, to $2,860, while Brooklyn and Queens rents saw increases by $49 and $50, to $2,449 and $2,100, respectively. This increase in rent prices is likely not a reflection of the city’s economy rebounding, but more so landlords attempting to make up for money lost during pandemic city exodus and rent moratoriums.

General Uncertainty and Upheaval

Historically, pandemics have led to social unrest and increased levels of violence, from the Black Death to the Spanish flu to the great cholera outbreak in Paris. This time is no different. There is a heaviness to everyday life, with animosity among neighbors growing. Our differences are dividing us. The nation is faced with a potential debt tsunami. And though such upheaval is not a direct influence on the real estate market, it eventually works its way into all facets of our lives. Real estate markets are forward looking, incorporate information quickly, and are segmented. Everything from capital gain tax policy to political instability will affect how affluent buyers view their wealth and appetite for risk. As we continue to move through hostile times, we will eventually find solid ground and more predicable outcomes. For now, it seems prices have leveled off somewhat, but uncertainty remains.