What a long 17 months of guessing we’ve had. After all of the changes in society, medicine, politics, and frankly the way we live our lives; it seems we are finally getting some visibility into what the near future will look like.
Well, it sure seems to be here permanently. I personally think that the main factors driving it (and why I think it is permanent) are:
- Wages: In 2019, the median American income was $31,133. Most of 2020, the workers at the bottom half of this range were being paid more to stay home than they made working. Personal savings are at an all time high. Personal income was at an all time high in January.
- Median Income: 2020 was the HIGHEST increase in median household income since 1979. 1978 – 1979 marked some of the highest inflation levels ever seen. Year over year median household income increased 9% ($5,370) in 2020. Median household income increased 11% ($1,500) in 1979.
- Permanent Shift: I’m not sure if the Biden administration will be able to increase the minimum wage to $15/hr officially; but it appears as if the mental shift (willingness to work for less) has cemented into the mind of America at large. Wages are rarely “walked back”.
Work From Home
In 2020, there was a lot of speculation around whether work from home (WFH) would become a permanent shift in the work place. We all pontificated whether or not companies would expand on this after it was no longer a requirement. It appears as if the answer was yes.
- Many companies (specifically tech) have announced they will permanently allow many of their employees to work from home. That list includes companies like Microsoft, Twitter, Square, Spotify, Shopify and Amazon. Some of this is full time and some is hybrid.
- Just last week, my wife got a call from some of her old clients. They wanted to sell their home they bought from her nearly seven years ago. Man, they cleaned up on the appreciation! They had moved here for their jobs, from a rural town in Central Texas. This month, they were told by their employer they can work from home permanently. They are engineers. So, back to rural San Angelo they go with a bunch of money in their pocket!
I plan to write more about this in the coming month. I believe it is imperative that real estate investors accept this new reality now. We are not having a crash. Wages and costs won’t go back to before.
REPLACEMENT COST IS THE NEW LOW COMP. Read that again. I mean it…