Eagle County real estate agents hear upbeat talk about nation’s economy
Elliot Eisenberg believes 2021 will be a remarkable year
Economics is a generally dour field. Elliot Eisenberg is the exception to that rule.
Eisenberg, who bills himself as the “Bow Tie Economist,” this week spoke at the Vail Board of Realtors’ general membership meeting, a session conducted both virtually and in person at the Westin Riverwalk Hotel and Spa in Avon.
Eisenberg was mostly upbeat about economic prospects for the rest of this year, including the currently rip-roaring real estate industry.
Eisenberg peppered his optimistic presentation with a caution: People on the lower end of the economic scale continue to struggle even as indicators return to, or surpass, levels seen in 2019. Those people continue to need government stimulus payments to keep up with bills or other needs. And, he added, the nation’s service sector — everything from barber shops to hotels and restaurants — is recovering far more slowly than the rest of the economy.
For most others eligible for the payments, those checks are going into savings or purchasing.
2021: A very good year?
“I haven’t felt this good about the economy since the end of 2017,” Eisenberg said, noting that tax cuts passed that year led to dramatic economic expansion in 2018. The stimulus packages passed in 2020 and this year promise to bring the same kind of economic expansion, Eisenberg said.
Progress in combating the COVID-19 pandemic is providing a real push to the economic recovery. Eisenberg noted that new, vaccine-resistant virus variants could derail the recovery.
“But that said, right now things are really good,” Eisenberg said.
Given his audience, Eisenberg spoke at length about the real estate market.
While brokers in the Vail Valley have been complaining for years about low inventory — an issue that’s been exacerbated by the current super-heated market — Eisenberg said home inventory is a nationwide problem. Builders haven’t kept up in virtually any market, he said.
Nationwide over the past decade, Eisenberg said “builders underbuilt by 4 million units.” That’s led to a chronic shortage in existing housing stock, with few prospects of a recovery.
But with demand outstripping supply, Eisenberg said he expects the run-up in prices to taper off this year.
Still, he added, there’s plenty of money in the economy to fuel continued buying. But, he added, the current situation is “unsustainable,” particularly since incomes are not rising as quickly as prices.
Another complication is stiff mortgage qualification standards. Still, Eisenberg added, rates remain historically low.
“You have to keep doing the job you’re doing,” Eisenberg told the Realtors. That includes helping buyers understand the basics of the market.
But demand should remain strong.
The value of home
“People value a home more than they did,” he said. Rather than being a place to sleep and eat when not working elsewhere, “A house is a place you’re going to live of lot of your life.”
And, he added, Colorado is one of the most attractive states in the country right now, along with most other intermountain area states.
Responding to audience questions, Eisenberg said he isn’t particularly worried about long-term inflation right now.
And, he added, coming corporate and capital gains tax increases will have an effect, but won’t be a “catastrophe.”
Realtor Mike Budd asked about possible effects of a shift away from fossil fuels, given that petrochemicals drive the cost of all kinds of industrial and consumer goods.
Eisenberg replied that the energy-related portion of the nation’s gross domestic product keeps shrinking, and that incomes have risen faster than the price of gasoline.
Another audience member asked about clients who believe there will be a serious correction in the financial markets in the next four to six months.
“I don’t see it,” Eisenberg said. “Short of a bad (COVID-19) mutation… there’s so much money, pent up demand and innoculations,” the economy should stay solid through the year.
If a bad correction does come this year, Eisenberg said “I’ll come back here and eat my shorts.”
Economist Elliot Eisenberg thinks he knows what was behind last year’s toilet paper shortage.
In short, demand collapsed for the low-grade product used in offices and factories, while working at home caused demand to skyrocket for the better stuff most of us bring home from the store.
Companies ramped up production of the better stuff, and product eventually returned to the shelves.