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The Great Migration
Home builders are currently selling homes faster than they can build them, with inventory declines occurring among homes either under construction or already completed. In addition, the inventory of homes that have not yet started construction rose only slightly, an indication that builders may be scrambling to secure more lots and open new communities. The reason the median price in August dropped for the second month in a row as well as year over year is that a growing proportion of home sales are occurring in the South, particularly in smaller and midsized metros where new home prices are well below prices in the West and Northeast. The housing market is also seeing a big uptick in first-time buyers who are purchasing homes at the lower end of the pricing continuum. The proportion of new homes for sale at $300,000 or less has jumped 10% over the past two months and now accounts for 40% of sales. A year ago, homes in that price range accounted for just 23% of sales. There has been much anecdotal evidence that there has been a big shift to the South from high cost areas along the West Coast and in the Northeast. Moving companies have reported big increases in moves to the South and the premium for U-Haul trucks leaving the Northeast and West for the South, compared to the other way around, has widened considerably. The South is also the nation’s largest housing market with the most inventory. Sales in the South have jumped 28.5% over the past two months, and several of the nation’s hottest markets are currently in the South, led by Austin, Tampa, Nashville, Raleigh and Charlotte. Many factors are likely contributing to the migration, including a desire to escape from the winter spent indoors during the pandemic that’s a byproduct of living in the Northeast, terrifying and massive wildfires along the West Coast and parts of the West and the desire to live somewhere with more open space where people are not crowded together into cities. Holiday Spending Forecast Deloitte’s holiday spending forecast is not overly jolly. They expect sales to increase between 1% and 1.5% from November to January compared to last year. The forecast reflects the lingering uncertainty about CV19 and the economy. A vaccine could spur consumer confidence and job growth, while continued spikes and layoffs could lead shoppers to focus on saving instead of spending. It is also possible that cash that would have typically gone towards travel, dining out and holiday events may be diverted to gifts as people try to figure out how to make the holidays special during a global pandemic. With more shoppers relying on online shopping, holiday sales online are expected to jump between 25% and 35% compared to last year’s 14.7% spike; that would add up to a total of $182 to $196 billion in online sales. Many stores are not opening Thanksgiving Day this year, deciding instead to give employees the day off and avoid creating pandemic crowds. Mall operator Simon says all of its malls will be closed. The Home Depot reports that holiday sales will last nearly two months instead of being concentrated over the Black Friday holiday weekend. Holiday Shipping Surcharges Many shippers are raising prices to help cover the costs of meeting surging demand over the holidays. Amazon will raise shipping rates over the holidays to offset the peak holiday surcharge scheduled to be imposed by the USPS from October 18 through December 27. This is the first holiday surcharge ever levied by the Post Office, which has been under tremendous pressure to reverse losses and start showing a profit. The surcharges will apply to the popular Parcel Select drop-shipping service, which allows consolidators to dump bulk parcels at the Post Office for delivery by letter carriers to residences nationwide. The increase will be as much as 7.5%, adding about 24 cents to the cost of a one-pound package. UPS also plans to mark up the cost of the SurePost product they operate along with the USPS. The increase could be two to four times the higher price it will pay to the USPS. FedEx has not clarified their holiday plans yet. They were originally expected to move all of their postal parcel business in-house by the end of 2020; however, pandemic-related surges in volume may have delayed these plans. Economic Recovery The US economy will only fully recover from the CV19 downturn when people once again feel it is safe to resume their normal activities, according to Fed Chairman Jerome Powell, who testified for three days before House and Senate committees on the response to the coronavirus’ impact on the economy. Some sectors, such as retail and housing, have seen sharp rebounds, while other sectors, including travel, leisure and entertainment, lag behind. Powell has repeatedly warned that prosperity needs to be broadly spread out in the long term to deliver the greatest possible benefit to the economy and has called for more support for the economy, but Congress remains deeply divided in this critical election year. The government would need to supply at least $500 billion in additional income support to US households to achieve 2% growth in consumer spending over the next twelve months, according to a new report from BCA Research. That means that another stimulus package doesn’t need to match the $2 trillion Cares Act fiscal stimulus passed by Congress in March unless the economy takes a serious and unexpected downturn. Most economists predict that third quarter numbers will show that the economy bounced back, perhaps rising as much as 30%. However, even a gain that large would leave GDP 5% behind pre-pandemic levels. Estimates for a full recovery and a return to positive year-over-year growth range from second quarter of 2021 to the end of the year. Much of the timing will depend on the course of the pandemic, the timing of a vaccine and the resolution of social and political unrest. Safety in Nature Research shows that nature reduces stress, boosts creativity, happiness and productivity and is also good for people physically. Amazon planted more than 40,000 plants and trees inside their Seattle headquarters, a move that many thought was more symbolic than actually beneficial. But in addition to having research-proven benefits, bringing nature inside in these pandemic times offers a degree of comfort as well as an escape. Office designers and consultants say that it is easy to bring nature into the smallest office buildings and workspaces. Simply allowing people to bring plants from home or changing the art from motivational posters to soothing nature-scapes can be a big boost to well-being. Other ideas include using plants along corporate walkways and in lobbies and other open spaces and painting in the colors and hues of nature. Droning On Walmart and Amazon are moving forward with plans to use drones. The FAA has issued a Part 135 air carrier certificate to Amazon for their fleet of Prime Air drones, which is the FAA’s stamp of approval for Amazon’s ambitious plan to use drones to deliver packages and shorten delivery times to 30 minutes or less. At a conference in Las Vegas last year, Amazon revealed a fully electric hexagonal drone that can carry up to five pounds and was smart enough not to run into the family dog or anything else. Walmart has started a pilot test of drone delivery of grocery and household items from their stores in Fayetteville, Arkansas. The automated drones can fly about 6.2 miles carrying packages that weigh up to 6.6 pounds. Walmart first mentioned testing drones back in late 2017, and has been using drones in some of their Sam’s Club locations to help manage inventory. Zoom Expands Reach Zoom is coming to devices, including Amazon’s Echo Show, Google’s Nest Hub Max and Facebook’s Portal. As part of the initiative, Zoom will sell a dedicated unit from DTEN with a 27-inch screen as part of the Zoom for Home program. The Zoom unit is $599 and will only work on specified versions of devices. Zoom plans to add voice tools eventually. Voicebot.ai.blog says there are 87 million smart speakers in use in the US, and 16.5% of the owners have smart displays, with Echo Show in the lead at 7 million devices. Why TikTok? And the winners in the TikTok negotiating war are…Oracle and Walmart. When President Trump announced he would ban TikTok in the US if it was not sold to an American company, several suitors threw their hats into the ring. At first a Microsoft-Walmart liaison was thought to be favored, but in the end TikTok chose to sell to an Oracle-Walmart partnership. Oracle will acquire a 12.5% stake and Walmart will acquire 7.5%; the resulting company will be called TikTok Global. One analyst noted that Walmart stands to gain new social tools and youthful consumers; he likened it to Walmart investing in Amazon when Amazon was first starting out. Having ownership in social media platforms allows retailers to directly tap into user likes/dislikes and interests, customize advertising and product placement and potentially design their own interactive advertising solutions so people can purchase within the app. Oracle provides merchant-facing technology that enables services such as personalized shopping and incentive marketing. © Robert Bosch Tool Corporation. All rights reserved, no copying or reproducing is permitted without prior written approval. |
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