Do Stocks Deserve To Be Expensive?

Some say it’s a bad time to live in big cities, but we can flip that around and say there hasn’t been such an affordable time to live in big cities in years. Furthermore, now that vaccines have been going out quickly (besides in the northeast which dealt with a big snowstorm) cities will soon be a desirable place to live again. It will work out great for renters who signed lease agreements at low prices. They will be paying low rent for a few months after the cities open up.

As you can see from the chart below, the 10 largest yearly declines in rents are from 12% to 27%. There has been a large social media campaign of people leaving San Francisco for Miami and Austin. That might be a separate issue outside of the pandemic. Business leaders don’t like how the government is run in these areas.

Office space is in a similar situation as residential rentals. Office availability rose 14.9% in January which is the highest since at least 2000. This is near the peak impact from the pandemic as workers will start returning to offices within the next few months. Leasing fell by almost 47% from last year. Rent prices fell for the 7th month in a row to $73.65 per square foot. Leasing supply in Manhattan was 1.9 million square feet in January which is the highest since July and 20% above the average last year.

Consumer Spending In January

As we mentioned in a previous article, January retail sales will be strong because of the stimulus. Redbook same store sales growth in the week of January 30th rose from 3.9% to 4.4%. The charts below show the latest spending according to Chase card data. Aggregate card spending growth improved in January, but it’s still negative. Discretionary spending is underperforming as spending on entertainment is suppressed. The worst hit groups have been airlines and lodging.

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