Metro Washington’s bifurcated economy struggles to find its footing as hundreds of thousands of people remain unemployed while the stock market reaches all-time highs. The June employment report show the results of the DC Metro economy’s “reopening” with tourism and hospitality employers adding 36K jobs, or 20% from the prior month.  In another hard-hit sector, retail employers (Trade, Transportation, Utilities) added 10.7K jobs, or 3% from May.

Even after gains in June, the four lowest wage job sectors (which include hospitality and retail workers) remain decimated with 145K job losses, or 26% of its total, when comparing June 2020 to June 2019.  Conversely, the top three high wage job sectors were mildly affected with only 29K jobs lost, or 2.8% of the June 2019 employment.

 

What does this mean for housing?

Multifamily

Multifamily projects will see higher vacancy rates and lower rents through this year and into next year thanks to the compounding effects of The CARES Act stimulus comes to an end and nearly 28,000 new units come to the market, according to CoStar.

First-time buyers and First Move-up buyers

Middle-income workers with job stability will take advantage of the historically low interest rates and buy their first home or first move-up home. Buyers will sense an increasing urgency to purchase as inventory remains low and home values continue to rise.

Move-up and Move-down buyers

Expect continued strength in the 2nd move-up and move-down housing market targeted to high income and high net worth households. Affluent households are experiencing confidence in their job situation, growth in their investment portfolio thanks to the 46% growth in the S&P 500 index market since March 23rd, and urgency to purchase due to record low mortgage interest rates. After spending months in lockdown nitpicking the failures of their in their current home, the affluent buyer will be a strong market through this year and into next year.

We should expect increasing volatility over the next 12 months as the pandemic rages on.  However, with volatility comes opportunity and we expect that deal making will continue to thrive in this environment.