One Big Thing
This past weekend, White House economic director Larry Kudlow said that enhanced unemployment will end as-scheduled in July. Instead, the White House is pushing for a back-to-work bonus to incentivize people to look for jobs – which seems to me like a questionable approach in an environment where unemployment is well into the double digits. I just don’t see a scenario where 21mm people return to work by the end of July. I sincerely hope that I’m wrong here.
A lot of people – myself included – have thought that enhanced unemployment will eventually be extended due to the number of people still out of work. It remains to be seen if Kudlow’s statement is truly a line-in-the-sand or a game of chicken where the feds blink at the 11th hour and extend. As I’ve pointed out before, rental collections likely hang in the balance since the end of enhanced UI would coincide with businesses running out of PPP proceeds and households running out of money from one-time rescue payments.
In related depressing news, new research by Bloomberg Economics indicates that 30% of U.S. job losses from February to May are the result of a reallocation shock. The analysis — based on the relationship between hiring, firing, openings and unemployment — suggests the labor market will initially recover swiftly, but then level off with millions still unemployed.
The bottom line here is that unemployment situation will ultimately determine the level of distress in the real estate market outside of niches most impacted by the pandemic. Most other economic data is a distraction at this point.
What I’m Reading
Exodus: Redfin is reporting traffic growth for online suburban/small town listings that has outpaced that for big cities by 164% in the past two months.
What Could Go Wrong? CalPERS is leveraging up to help it achieve its aggressive 7% targeted rate of return.
Close to Home: Hotels are now focusing on guests who can drive to get to them.
Accelerator: The pandemic will accelerate property re-purposing trends that were already underway….and its not just malls.
Ripple Effects: Amid high U.S. unemployment in the coronavirus pandemic,the number of adults living in a parent’s or grandparent’s home grew by more than 2.7 million in March and April, said Zillow, adding that the vast majority of those who moved home — about 2.2 million — are from Generation Z and are between 18 and 25 years old. Those 2.2 million Gen Zers represent an estimated $726 million in rent payments each month — about 1.4% of the rental market at risk.
Chart of the Day
Source: The Washington Post
This Actually Makes Sense: An alternate reading of Mayan calendar suggests end of the world is next week.
Stable: A recently broken up 29-year old woman got wasted before flying and forced the plane she was on to land after repeatedly hitting a window and cracking it at 30,000 feet.
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