Data, analysis and insight into the economy and commercial real estate market by Dr. Peter Linneman:
Highlights:
Recovery will be substantial with an increased number of future vaccinations. If 70% is reached by late summer 2021, economic recovery will be on a solid rebound.
According to BLS, as of December 2020, the unemployment rate is 6.7% (10.7MM people). Note: January, 2020 was 3.6%. Linneman estimates current unemployment rate is higher at 12-14%, as "official" Bureau of Labor Statistics rate does not count those who have dropped out of labor force.
Most of unemployed who rent class B and C multifamily assets work in "Accommodation/Food Services" and "Retail Trade." This is estimated to make up 14-15% of GDP, or $3T. Note: Q3, 2020 GDP = $21T.
What is needed to sustain this 15% of GDP or $3T (unemployed due to limited or closed food/drink and retail) to get us to late summer when vaccines are readily available? $3T / one half a year or .50 = $1.5T.
Can we get there with a new stimulus bill? Yes with Biden's, "Build Back Better Recovery Plan" of $1.9T.
M1 money supply is increasing rapidly (the most liquid forms of cash: stocks, bills, checks and basic savings accounts).
This flood of cash will chase the assets that produce the greatest yield in a low bank deposit, dividend and bond yield environment: REAL ESTATE.
The Fed has advised that treasury bond yields will remain depressed for the near future, thus debt costs will be low. This will lead to a future rise in asset prices. As such, it is prudent to make offers now.
If a real estate buyer can generate a solid cash stream for investors that beat alternatives over 5 years due to low cost of capital and anticipated, elevated, future sale demand, real estate is a safe investment for the return of and on capital.
Biden Stimulus Plan January 14, 2020:
Highlights:
$1.9T added funding as "a path forward."
Rescue: Financial relief to sustain families and firms until a vaccine is widely distributed.
Recovery: Build back through investment in infrastructure, research & development, innovation and clean energy.
Fund rental assistance for 14MM Americans. Total of $30B.
Continued small business funding.
Extend unemployment insurance past March, 2021.
Extend eviction and foreclosure moratoriums through September, 2021.
$400/week in supplemental funding for food and rent.
An added $1,400 stimulus payment to total $2,000.
As more of the population is vaccinated with urgency, the faster they re-enter job market and economy rebounds.
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