Real estate – the winners and losers of the pandemic

Americans are always on the move, especially when they are young and looking for opportunities. Historically, they have left the northeast and the Rust Belt and have moved south and west. Over the past decade, they have increased the populations of Nevada, South Carolina, Idaho, Arizona, Colorado, Florida and Oregon by more than 6 percent.

On the other hand, they reduced the populations of Alaska, New York, Illinois, Connecticut and Hawaii by more than 5 percent. (Texas won 4 percent, California lost 2 percent.)

They mainly move to find work.

The pandemic has brought this movement to a halt for a while, but is now likely to accelerate it as job losses or gains are uneven across the country. That means more opportunities (and risks) for real estate investors.

The pandemic first caused a massive decline in jobs in all local markets, but also the expectation that those jobs would eventually return. When states “reopened” their economies at different rates, it was hard to compare how well that expectation held up locally.

But most states now have similar reopening policies, so it’s a good time to make a comparison — not just about the short-term economic outlook, but about structural job changes in local markets that will have lasting effects on demand. to homes. Some markets will have permanent job losses, others will gain.

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Job Types

In total, 4 percent of pre-pandemic jobs have so far not returned. That includes 2 percent in business services, 4 percent in manufacturing, 4 percent in health care, 5 percent in government and 14 percent in restaurants and tourism.

More jobs in restaurants and tourism will eventually return as more people get vaccinated, but markets where that recovery is weakest include San Francisco, New York, Boston and Philadelphia. On the other hand, almost all of those jobs have returned in Oklahoma City, Jacksonville, Salt Lake City, Birmingham and Houston.

Manufacturing jobs will almost certainly be lost in some markets as the pandemic accelerates factory automation. Markets most likely to lose these jobs include Seattle, Houston, Los Angeles and Cleveland. But recovery has been rapid in Memphis, Madison, Columbus and Omaha.

The most important indicator

Business services encompass a wide variety of jobs that every business needs, from lawyers, accountants and IT to agency workers, cleaning and landscaping. It is the largest sector of the economy and has created the bulk of new jobs over the past decade.

In the pandemic environment, it is the key indicator of where future growth can best be expected. The faster business services jobs attract, the more likely a market is a good long-term bet for real estate investors.

This table from Local Market Monitor shows the best and worst performing markets to date.

Northport, San Antonio, Ogden, Memphis and Austin lead the pack. Except for Ogden, their overall work situation is still negative, but that won’t be for long.

The worst performers – Las Vegas, Orlando, Grand Rapids, Richmond and Los Angeles – are likely to experience a very slow economic recovery and weak housing demand for years to come. It’s hard to bet against Vegas and Disney, but their labor-intensive operations will require fewer people in the future — and less housing for them.

Best Strategies

Jobs are not the only thing to consider when deciding where and how to invest. Housing is very expensive these days in North Port, Raleigh, Austin and Stockton, so apartments are a better option there. In Birmingham, Kansas City and Memphis, on the other hand, prices are much lower and it is easy to rent single-family homes.

In Knoxville, house prices are low, but rents are even lower, so apartments are a favorite here too. In Baltimore, population and job growth have been weak for years, so the good news about business services may be the only good news right now.

In Ogden, Tampa, Knoxville, Colorado Springs and Salt Lake City, house prices are close to boom area – you could be buying near the top of the market – so you need to be sure you don’t factor stock gains into your expected efficiency.

San Antonio, Charlotte and Nashville are the least complicated investment locations.

And precisely because the job situation in markets like Las Vegas, Grand Rapids and Orlando is very bad these days, you can still invest there – every market has areas that will do well. You just have to be careful, which means stick to the mid-rental range regardless of the zip code you’re considering renting a home from. (And of course we can tell you where that range is.)

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