The Macro View
By David Grana
Did anyone ever realize that Mr. Magoo was voiced by Jim Backus (a.k.a. Mr. Howell of Gilligan’s Island)? I only found out a few years ago and was absolutely over the moon, having grown up a fan of both shows and loving both characters. I’m starting to feel like we’re as clueless as Howell as we are blind as Magoo these days. To put it into context, we have coronavirus cases spiking through parts of the country, while casinos continue to open up and theme parks plan their own reopenings.
Jim Backus played Mr. Howell on Gilligan's Island
and provided the voice for Mr. Magoo.
At the same time, church gatherings and large conferences are still relegated to being held digitally, while large protests and rallies are a-okay. Unemployment is high, but the housing market and stock market are rocking and rolling more than a Black Sabbath concert. What gives? This is more confusing than a lecture on Einstein’s Theory of Relativity. Does anyone know what’s going on?
When casinos in Las Vegas opened up on June 4 and large crowds gathered in cities across America without anyone decrying the threat of COVID-19, I had just assumed that everything was just fine and that we would get back to life as it was prior to the pandemic. However, I am now coming to find out that, as cases start to rise in various states, some are implementing rules making facemasks mandatory in public, or even considering a move in that direction.
Many of us are excited at the prospects of watching our favorite pastimes, even if only on television. The thought of watching a baseball game or the conclusion of the exciting NBA and NHL seasons, respectively, is a much more palatable alternative to the current one of eviscerating one another on social media. But even that remains highly uncertain, with a 70-game Major League Baseball proposal having been rejected late last week, only to be followed by reports over the weekend of COVID-19 cases popping up in various teams’ training camps. The NBA will recommence at the end of July, as will the WNBA, both leagues playing without fans in Florida. Dr. Anthony Fauci splashed cold water on fans that have been keen on watching Tom Brady as a Buc and the inaugural season of the Las Vegas Raiders when he gave a stark warning about the dangers of commencing the NFL season without very strict guidelines. I suppose if the league goes the way of other sports and doesn’t allow fans, enthusiasts can always hop on a plane to the UK to watch the other kind of football, which recommenced its season and is starting to consider plans for allowing spectators into their stadiums.
"...the biggest roadblock of all may be the fact that the coronavirus, much like low interest rates, is here to stay with us, possibly through much of 2021."
So, why all the fuss over sports? Well, if you’ve ever been to a baseball game in Wrigleyville or AT&T Park, the revenue generated by fans consuming food, beverage and souvenirs in the surrounding restaurants, bars and shops is a big contributor to many cities’ economies and the real estate that they occupy. The cancellation of seasons or the omission of fans from stadiums could extend the pain already felt by the struggling retail and restaurant sectors.
What remains anomalous is housing, which continues to see a boom in various states, in spite of the still controversial 13.3% May unemployment rate and the worse-then-expected 1.5 million jobless claims for the week ending June 13. The only logical explanation is the melange of Federal unemployment assistance, mortgage forbearance, eviction moratoriums and PPP loans. There is also the hope of another stimulus package, which may include another check and more unemployment benefits. This is possibly the only hope for income for some, but also poses a roadblock for a quick economic bounceback.
Regardless, the biggest roadblock of all may be the fact that the coronavirus, much like low interest rates, is here to stay with us, possibly through much of 2021. And with mixed reports over the efficacy of herd immunity and antibodies, at this stage, this is a coin toss at best.
One of the big stories that has been ongoing throughout the week are the resignations of police officers in various cities, along with the other pandemic, notably the “blue flu.” The aftermath of recent civil unrest and proposed police reforms may see a reduction of law enforcement funding, as well as officers simply walking away from the job. This poses a long-term threat to property values and security costs and could be a make-or-break factor for where people and businesses decide to settle. The states and communities that follow through with this narrative may be scoring social approval points, but could leave property owners in a dire position. They could also be undercutting their own budgets, which will feel a precipitous decline in property and sales tax revenue. We’ll keep following this as it develops.
Source: The Crime Report
And lastly, a startling announcement was made by Australian Prime Minister Scott Morrison late last week. In a press conference, he warned that his country had been hit by a series of very serious cyber attacks by a state-actor. He failed to mention which state specifically, but one can only imagine that it is China, with which the Land Down Under has been engaged in a series of spats, much like the US. What this means for macroeconomics and geopolitics has yet to be seen, but it will certainly be on our radar as more is revealed.
While we try and figure out what in the world all of the foregoing means, I encourage you to stay safe and have a great week!
The Micro View
By Pam Junge, CCIM
I couldn’t wait to get my driver’s license when I turned sixteen. There was no permit or proof of experience behind the wheel needed back then (this was a good thing because neither of my parents were brave enough to sit as a passenger in a car with me in the driver’s seat and in charge of their lives). All I had to do was hit that magical day on the calendar, walk into the DMV, pass two tests and BAM! A license to drive. Watch out Vegas! I was a somewhat confident kid. I figured I could pull it off but was a little apprehensive of parallel parking, which was a mandatory pass or fail. What to do?
Pam's early driving days may have been akin to the car chase scene from the 1980 film The Blues Brothers.
Well, like any kid would do, I stole the keys to my mother’s baby blue Pinto and gave it a whirl in our humble little Spring Valley neighborhood. After stalling the clutch four or twenty times I decided that this time I’d gas it hard. And I did. Backwards. And proceeded to hop the curb, wipe out my neighbor’s mailbox and stall yet again in their front yard. Let me tell you - that mailbox came down just as fast as Hey Reb and poof - it vanished like it had never existed! I can’t help but think that that’s exactly what the last several months have felt like, over and over again. We’re driving blind and corona economics and civil unrest are testing the very best economists and leaders around the world, for nothing makes sense. Up is down. Left is right. Nothing adds up. The new normal is reshaping our every thought and movement and how we “do” life. Let’s take a look at the antics, I mean developments, of the last week.
The unemployment reporting is one of my favorites to digest. The gas lighting and sensational headlines leave one thinking one moment that we’re out of the woods and the next moment contemplating a move to another state. Las Vegas is exceptional in so many ways, and unemployment is one of them, due to our heavy reliance on tourism (did we learn nothing in the crash of 2008?). We’re simply not comparable to the rest of the nation.
In fact, Nevada is reporting the highest unemployment in the nation and Las Vegas takes up most of the state’s percentage right here locally. Our rate is nearly double the rest of the country as we experience what’s possibly the greatest economic shock our city has ever seen. The cold hard truth is this: As you walk through your local grocery store aisle, one out of four people you encounter are currently unemployed - just over 25% of our city’s population! This number only slightly improved with the phased reopening of business and industry by an approximate 7%. Last week, we reported that the fundamentally archaic Nevada Unemployment system still had over 80,000 unprocessed claims, inciting protest gatherings outside state buildings.
This week brought the resignation of the new Director (just 49 days after accepting the position) Heather Korbulic, due to personal threats. I’m not sure if any one human being would have the capacity to fix the underlying issue of an antiquated system under epic proportions of duress. So here we are, with no DETR Director, driving blind again. Final disclaimer here - don’t believe ANY of the math I just reported. It’s also reported that approximately 75,000 additional claims were rejected last week due to errors in filing and/or said ineligibility, leaving us…well, it’s anyone’s best guess.
In other developments, we’re quickly closing in on the end to the eviction moratorium leaving many tenants with no safety net. It’s unclear just how many rentals are non performing at the moment, however, experts are predicting a very high number of evictions. For months, property landlords who are getting half or no rent payments have been biting their tongue, while their hands are tied. "Obviously landlords are extremely frustrated because they are still having to pay their mortgage payments, utilities, do repairs on tenants units and meet their monthly obligations. And meanwhile, very often, they are not collecting rent," said Ann E. Kolber, an attorney who represents landlords in Las Vegas in a recent interview with Fox 5. This is just the first of a series of dominoes that will fall in the aftermath of stimulus funds holding the economy on pause for the moment. "By mid-July, we are going to see a lot of cases being filed and by the end of July we are going to see a lot of evictions taking place and empty units," said Kolber. What is the plan for those unfortunate tenants who may still be unemployed and haven’t received their unemployment benefits yet? We don’t seem to have one. Just driving blind.
It should have been no surprise that last week brought a few recorded spikes in confirmed COVID-19 cases with the opening of the economy, people gathering and simply the increased number of testing. The last report shows Nevada at just shy of 13,000 cases. What is confusing is the dissemination of information from our supposed trusted sources and how quickly they can pivot to the other side of the coin. The one burning at the top of my mind right now is the recent debacle by the World Health Organization (WHO).
A comment by one of their officials called asymptomatic transmissions “very rare” touched off a furious scientific debate over the unresolved question and attracted widespread criticism of the organization. Less than 24 hours later, the WHO convened a special news conference to moon-walk back its comments, stressing that much remains unknown. Yet we were told just a month ago that a person is MOST contagious in the asymptomatic stages. The Nevada Gaming Control Board also recently pulled a “just kidding” moment with us. While masks were optional, yet strongly encouraged, for patrons at the onset of the opening of casinos, they are now required in certain instances. The new rule applies to players of blackjack, roulette, craps, poker and other table games. All casino employees also are required to wear facial protection. Masks aren’t required of other casino patrons, including slot machine players, but casinos are required to offer them to customers and encourage their use. “In the first week (after the June 4 reopening of casinos), we wanted to take an approach of communicating and encouraging compliance and talk to licensees about what our expectations were, but in the second week, it became abundantly clear based on our agents’ observations that patrons’ usage of masks was significantly declining,” Control Board Chairwoman Sandra Morgan said Wednesday evening in an interview with the RJ. Just put on your face mask and cross your fingers. We’re still driving blind.
Who is not driving blind? Home buyers. Just look at the Las Vegas Realtor stats pulled exactly two months apart. There is only one glaring jump in trend, and that’s the number of houses currently going under contract, which is up approximately 43%. Unless we start putting more houses on the market soon, this trend will deteriorate our already low inventory and put sellers in the driver’s seat, further causing a rise in value. Now, there are a myriad of cultural and economic shifts that play into these two graphs that we could never delve into in a short weekly recap. Low interest rates, mortgage payment deferment, long term unemployment, stimulus, credit crunch, rental market pressure and so many other economic and cultural shifts will play into this ever evolving story, but for right now we’re continuing to see growth and confidence in the housing market, in both the resale and new home sectors.
While we navigate this winding road with no map, in the dark and no directional signage in sight, we would be remiss to think there might not be a flat tire here and there along the way. We might even run out of gas at some point. What we can focus on is that we’re still gaining ground. Is there a finish line? I sure hope so. Until then, we forge ahead, hit the apex, nail the parallel parking in between and celebrate every pothole we navigate around. Stay safe out there. Have a great week and stay #vegasstronger.