January 7, 2021
The economic recovery in 2021 will be similar to the flight path of a butterfly, real estate economist Peter Linneman has said. On Wednesday’s Walker Webcast, the first of the year, Linneman explained that analogy: instead of suggesting something graceful and weightless, the flight path is “not terribly fast, quite erratic, moving forward but up and down.”
It’s the nature of this downturn—a health crisis stemming from a pandemic, coupled with both public and private response to it—that has led to a fitful recovery, said Linneman. The combination of government-mandated lockdowns and people’s reluctance to resume activities that are actually permitted again, such as flying, has made for uneven progress.
The recovery won’t reach the sure and steady trajectory of a migratory bird, he said, until vaccines for the COVID-19 vaccine have been widely distributed and—in the case of those requiring two shots—had time to take full effect. That transition from a butterfly’s erratic flight path will start occurring in June or July, Linneman predicted.
In the meantime, there’s the matter of taking stock of what 2021 is bringing—a process that Linneman has already begun with the latest in his quarterly Linneman Letter series. He made his fourth appearance as the guest of Walker & Dunlop CEO Willy Walker to unpack some of the data contained in the winter 2021 edition.
As a measure of economic progress, Linneman suggested it might be better to focus on metrics such as GDP growth and the employment picture rather than the stock market. “Don’t confuse corporate profits with how the economy is doing,” he said.
By measures such as the savings rate and personal income growth, the economy at present would be quite strong—except for hard-hit sectors such as retail and restaurants, representing a swath of GDP that Linneman estimated at about 15%. For that 15% segment, further relief will be necessary over the next six months or so, yet Linneman questioned the need to provide relief beyond that segment.
Looking ahead, Linneman remains bullish on the viability of cities as live-work-play environments, even if they haven’t been especially active over the past 10 months of the pandemics. Historically, he said, “Cities are vibrant economic engines and vibrant social engines.”
Replays of the Jan. 6 Walker Webcast are available by clicking here and through Walker & Dunlop’s recently launched Driven by Insight podcast series.
For comments, questions or concerns, please contact Paul Bubny