US experiences alarming rise in home prices amid Covid – leading macroeconomic influencers

5 January 2021 (Last Updated January 5th, 2021 07:19)

Economists believe that the coronavirus pandemic is turning the usual trends on home prices across the US.

US experiences alarming rise in home prices amid Covid – leading macroeconomic influencers
Many workers value flexible start and finish times or working from home.

Economists believe that the coronavirus pandemic is changing the usual trends on home prices across the US. Smaller metropolitan markets such as Kansas City, Indianapolis, Austin, Memphis, and others, are experiencing strong price gains as Covid pushes people out of some of the largely occupied cities on the US coasts.

Gregory Daco

Gregory Daco, chief US economist at Oxford Economics, re-tweeted about home prices rising faster in the middle of the US as the coronavirus pandemic forces people out of the large cities on the coasts. Historically, these cities have witnessed a sharp rise in property prices due to leaner supply and high demand. However, this is not the case now say economists, who point at smaller metropolitan markets such as Indianapolis, Cincinnati, Cleveland, Kansas City, Memphis, Pittsburgh, Austin, Texas, Idaho, and Boise to be experiencing the strongest price gains.

Reports have suggested a remarkable rise in home prices of about 8.4% in October 2020 compared to last year, and a 7% up since September 2020 which is being considered as the largest monthly increase in a decade.

According to the Federal Housing Finance Agency, home prices in the smaller cities have now increased by 10% compared to the previous year, the article noted. These cities have been known to be affordable, and with more inventory of homes available for sale. However, the sudden strong price gains in these smaller markets is indicative of the prevalence of remote working trends and how people are making the move from more expensive markets to affordable markets due to the pandemic.

Marcin Piatkowski

Marcin Piatkowski, an economist, re-tweeted an article on how the Organisation for Economic Co-operation and Development (OECD) warned governments on re-thinking constraints on public spending. According to Laurence Boone, chief economist at OECD, fresh fiscal austerity risks public backlash after the coronavirus crisis, and that the mistakes of 2010-2011 should be avoided.

She also calls for international locations to achieve long-term sustainable goals rather than resorting to short-term targets for public deficits and debt, the article noted. Consequently, Boone emphasised the need for governments to continue to provide fiscal coverage to induce public spending and decrease taxes, in order to help revive economies and overcome unemployment trends as the coronavirus pandemic eases.

Economists believe that this could be a fundamental shift for Europe, where European Union (EU) treaties are driving international locations to cut debt to 60% of the gross home product, whilst in the UK, the federal government has pledged to reduce the debt burden, the article highlighted.

John Cassidy

John Cassidy, a writer at The New Yorker, shared an article on Chicago Federal Reserve President Charles Evans’ views on a long accommodative monetary policy. According to Evans, even though the vaccines may help in curbing the ongoing coronavirus pandemic to some extent in 2021, the US central bank will still have to adopt a long accommodative monetary policy.

Evans further stated the need for economists to be equipped for a period of low interest rates and the expansion of the nation’s balance sheet, to achieve the primary goals of full employment and stable prices. However, reports suggested that the US economy was far from achieving either with a 6.7% unemployment rate in November 2020 and inflation lingering below 2% goal for years now, the article noted.

He also convinced markets of a healthier recovery from the pandemic, with Fed asset purchases expected to continue and no further tightening of the monetary policy. This could support both, a strong job market and a sound inflation rate, the article detailed.