Give Me a Bigger Piece of the Rock

Trillions of dollars have been spent so far, and the economy is hurting so badly that Congress and the President are negotiating another $2.0 trillion coronavirus rescue package.

Yet in the midst of misery there's a housing boom. [bold added]

There are, broadly, three forces behind housing’s resurgence. First, while the crisis has put millions out of work, those job losses have been concentrated in lower-paying services industries, so those hit hardest tend not to have the means to buy a house in any circumstances. Meanwhile, the higher-income earners who generally can afford a house have weathered the downturn much better.

Second, the downturn, and the Federal Reserve easing efforts it brought forth, have led to a sharp decline in borrowing costs. The average rate on a 30-year fixed mortgage has fallen to 2.8%—its lowest level on record—from 3.7% at the start of the year. That has made it, on balance, easier for many people to afford a house.

Finally, the pandemic has prompted many people to move away from urban centers, such as New York City, to more socially distant accommodations in the suburbs, while the work-from-home revolution has convinced some to move even farther afield. There has also been an increase in demand for vacation and second homes.

Normally during periods of uncertainty even the well-off hunker down and preserve their savings. In this unusual year many have decided there's greater risk in staying where they are, especially if they're renting or owning in a high-density urban area.

Some experts believe the exodus from the cities is short-lived, while I, no expert, think it has some staying power. From four months ago:

Your humble blogger believes that this time is different; the de-population of urban centers won't reverse itself for at least 20 years. As services like fire, education, health, transportation, and police are asked to do more on frozen budgets, businesses and the middle and upper classes flee--not all at once, to be sure--but enough so that the tax base erodes. Services are further reduced, and the flight continues. The admittedly extreme example is Detroit, a once-great American city that has never recovered from the 1967 riots.

We are entering a downward spiral that is extremely difficult to turn around. Almost everyone wants to feel safe where they live, and cities are going in the opposite direction with COVID-19. (Defunding of police forces might be the last straw for many American urban dwellers.)

Green acres is the place to be: