Home Buying & Durable Spending
Tuck professor Brian Melzer has studied the close connection between home buying and durable spending. The pandemic economy is proving his research right. Search homes for sale in Flying Horse, Colorado Springs, CO here: http://www.rehava.com
Melzer predicts that the demand for homes will be more of a long-term trend. More and more people gamble that their employer will let them work remotely even when the pandemic comes to an end.
As we enter the second year of the COVID-19 pandemic, its effect on where we spend our money has become very clear. During the lockdown last spring, the money we would have spent at restaurants and bars shifted nearly dollar for dollar to food and beverage stores. When the recession took hold in April, consumer spending decreased nearly across the board. Annual sales at Macy’s, for example, declined by nearly 30 percent People didn’t need new clothes for work or socializing. Between February and May, rail and air travel declined 96 percent and 91 percent, respectively.
More Spending on Furniture, Appliances, etc.
One big exception to the downturn, Tuck professor Brian Melzer noticed, was in home-related spending on durable goods such as furniture, appliances, and home-improvement items. “People were spending a lot of time at home, and they realized they wanted to invest a lot in those spaces,” he says. One data point he offers in support of that explanation is the rising fortunes of Home Depot, whose revenue increased 20 percent during the company’s latest fiscal year.
People were spending a lot of time at home, and they realized they wanted to invest a lot in those spaces.
Spending to Persist For a Few Years
The spending story evolved again during the summer, when the real estate market emerged from its forced slumber. Home sales skyrocketed, making up for lost time during the lockdown. Also, fueled by workers’ newfound ability to work remotely. Homeownership in the U.S., which peaked at 69 percent in 2006, had tumbled during the Great Recession to 63 percent. In just a few months in 2020, the homeownership rate nearly recovered that lost ground. It reached 68 percent at the end of June. For Melzer, that’s a good sign that spending on durable goods will persist for at least a couple of years.
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