Significant Opportunities Exist Within Broader Housing Market
Värde believes there are substantial opportunities in certain segments positioned to outperform the broader U.S. housing market, which entered the pandemic from a position of relative strength. The unique nature of the disruption of COVID-19 then caused supply and demand factors to play out in a very different way to a typical downturn. The immediate effect has been to reduce supply and bring demand forward, as homebuyers seeking more space accelerated single-family homebuying decisions, helping to support prices.
Government policy has also played an important role, providing short-term stability to the market and preventing extreme scenarios that could have had a destabilizing effect. In particular, through stimulus, generous unemployment benefits and policies on forbearance, government policy has prevented the traditional translation of severe economic damage and high unemployment through to housing prices.
As the market is gradually weaned off this support, Värde expects a far more nuanced picture to emerge, caused by the differing impact COVID-19 has had on sectors, geographies and age groups. Secular trends accelerated by the pandemic, including the desire for more suburban housing, and demographic trends will create clear winners and losers.
With a great deal of uncertainty surrounding the future environment, Värde continues to focus on assets that are likely to perform well in all scenarios. Assets that provide inflation-protected income streams and have strong levels of underlying demand, such as active projects in desirable locations, offer the most attractive opportunities. For example, Texas metro areas offer opportunity and affordability, a combination that many other large cities don’t.
“People in Texas have a better shot at getting some of the things associated with middle-class life,” says Joel Kotkin, professor of urban development at Chapman University in Orange, CA. “Also, Texas offers great choices for city lovers. If you live in some other states and desire a truly metropolitan area, you might have a single good choice. For example, New York has New York City. Illinois has Chicago. Georgia has Atlanta. Yet unlike most other states, Texas has several major cities to choose from — Houston, San Antonio, Dallas, Fort Worth, Austin and El Paso.”
Lisa Brown has decades of experience in corporate communications and marketing management with organizations including Coldwell Banker Residential, Grubb & Ellis, Marcus & Millichap, NAIOP, SIOR and ALM.
In those positions, she worked in conjunction with chief executive officers and chief marketing officers to create corporate messaging, cohesive branding standards, strategic marketing plans and thought pieces. Brown is a frequent speaker at industry events and an editing adjunct professor for an online course. She has a master’s degree in mass communications from San Jose State University.