Needless to say, the economy took a big hit last year due to the effects of the global pandemic. While the US financial system held fairly strong through the beginning of the pandemic, eventually, slowed down government responses led to some major damage done. The US economy is still far from full recovery, but a bit of progress was made due to Trump’s last efforts to help rectify the situation by passing the second stimulus bill. However, there were millions of people that remained jobless going into 2021, the future of the stock market still remains up in the air and the pace of real estate recovery is quite uncertain at this time. All three of these things could pose a huge threat for Americans this year. So brace yourself for the new world order and keep a close eye out for some of the dangers that may lurk around the corner.
EVICTIONS AND FORECLOSURES
First off, as of February, there were still over 10 million Americans unemployed. And with the extended benefits that Trump ordered set to expire in March, this can be another shit show waiting to happen if Biden doesn’t act fast. Homelessness is looming around the corner for millions of Americans. Experts estimate that tens of millions of households could face eviction or foreclosure when Trump’s protections expire and the inability to pay back rent could cost millions more of their homes. Being that incredibly low-interest rates and months of teleworking have prompted a surge in home purchases, the demand for housing is extremely high at the moment. It is only a matter of time before the prices of the housing market shoot up. Higher prices, combined with lower income and stricter lender qualifications will be a nightmare for those who lose their home. It will be extremely hard for them to even obtain a new place to shelter their families. However, this is not only an issue for the American people but puts the whole economy at risk. Massive losses taken by landlords and mortgage servicers could cause a ripple effect through our entire financial system.
STOCK MARKET
If you’re an investor, enjoy the low stock prices while you can. This most certainly won’t last long. In fact, we are already seeing many stock prices starting to climb back up. The stock market was among the first to take a hit during the pandemic, but it was also one of the first to make a full recovery. This is mainly in part of a new wave of investors hitting the mark because of the low soaring prices. While the share prices of companies in hard-hit sectors remain fairly low, others like tech and health stocks unfettered by the pandemic pushed major stock indexes to record heights. Expert financial analysts Brian Overby shared this forewarning going into this year, “The marketplace is indicating more uncertainty as we head into the New Year. It is not often that you see most of the major indexes setting new all-time highs and VIX index settling in the 21% to 24% range.” Should stocks continue to surge over the course of the year, we will probably see many of these newbie investors begin to withdraw their money from the stock market in fear of losing their investment with no intent of reinvestment. This could have a huge impact on the overall US economy.
REAL ESTATE
We briefly touched on the soaring prices of the housing market a bit earlier and how that could have a drastic impact on the economy. But perhaps, the bigger danger for the economy is the commercial real estate industry. Work from home is sure to be one of the lasting effects of Covid-19. Many companies have discovered just how much money they could save without having to purchase office space and still be able to drive the same productivity. This has many business owners questioning if they will ever go back to investing in office space and storefront locations. Property segments like data centers, cell towers, and logistics facilities were able to quickly recover from the initial shock of the pandemic. However, many traditional property types are still experiencing a rise in vacancy rates, a fall in rental rates, or in some cases both. With real estate being amongst the top contributors to the US GDP, the drastic decline in the real estate industry will have a negative impact on our overall economy.
All in all, the struggles the Covid-19 brought are far from over, we’ll be recovering years to come from now due to the ripple effect. At some point, the government has to help come up with long-term solutions, instead of providing simple bail-out funds. The government needs to find more ways to stimulate small business growth that will in turn create more jobs and will vastly reduce the amount of Americans unemployed. With a rise in businesses seeking employees, Americans will be able to bring in the income needed to keep their homes, they will continue to have funds to invest in the stock market and the need for commercial real estate will rise again. Small business has always been the backbone of the American economy. Start the recovery process there and watch how our economy will soar again.