The big driver behind the recovery should be pent-up demand.
In a late February report, financial services firm Morningstar said many consumers were eager to spend, but their options were limited because of social distancing. Now, things are opening back up, which should drive more expenditures.
In the report, Morningstar projected that a “snapback of consumer services,” including restaurants, hotels and air travel, would propel real gross domestic product (GDP) growth to 5.3% in 2021 and 4% in 2022. Consumer services represent about 70% of total consumer expenditure, but have been curtailed by the pandemic.
Once mass vaccinations occur, Morningstar thinks “the floodgates will” open for consumer spending. As this happens, expect hiring to improve, especially in hard-hit sectors like restaurants and hotels. It projects the unemployment rate will fall to 4.3% in the fourth quarter of 2021.
Others have equally optimistic projections. Fannie Mae projects the unemployment rate will drop to 4.5% by the end of the year. By comparison, joblessness was at 3.6% in the fourth quarter of 2019.
What does this mean for apartments?
Already, there are strong signs of a rental resurgence. CBRE said the apartment market stabilized in the first quarter—one quarter earlier than expected. Rents rose 0.4% in the quarter, the first increase since the first quarter of 2020. CBRE says seasonality, widespread vaccinations, an improving economy, additional fiscal stimulus and the return of office workers should push multifamily growth even higher over the next two quarters.