Is Housing In A Bubble?

Now that 2020 is over, there has been some camouflaging of how bad the recession was because of how great the stock market has done and optimism about the vaccines. On the other side, the National Bureau of Economic Research (NBER) hasn’t determined the end month of the recession yet. It makes sense to wait until the virus is contained before making that call.

The recession is clearly over, but the NBER isn’t a forward-looking investor like markets are. It is making sure it won’t get it wrong. Sometimes end dates are changed, but there aren’t that many options for this one because it was so brief. The recession was basically from March to May. You can even go by weeks if you want to, because the drop off and recovery were so sudden.

The recession was devastating to the bottom 50% of wealth/income and small businesses. It doesn’t matter how much the Nasdaq 100 rises. Let’s face the facts. Large companies were, in some ways, helped by the virus. That doesn’t mean it was a good thing, since it came at the expense of small businesses. One of the most dramatic data points on the recession was recently released.

As you can see from the chart above, there was a 17.9% yearly increase and a 16.8% monthly increase in U.S. households filing for food stamps in April. The divergence among states is massive. North Carolina had a 2.4% monthly decline and Massachusetts had an 89.6% increase. The virus didn’t affect the south early in the pandemic. It was more of an issue in the summer.

This is just a glimpse of the devastation caused by the recession. This gets to how economically unstable working-class households are, even though households have deleveraged since the housing bubble. It only took a few weeks for people to go straight to food stamps. This program doesn’t give people much money to spend on food, leading to food insecurity.

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