Real Estate- The Pandemic Winners And Losers

Americans are always moving, especially when they’re young and looking for opportunity. Historically they’ve left the Northeast and the Rust Belt, and moved South and West. In the last decade, they increased the population of Nevada, South Carolina, Idaho, Arizona, Colorado, Florida and Oregon by more than 6 percent.

On the flip side, they decreased the population of Alaska, New York, Illinois, Connecticut and Hawaii by more than 5 percent. (Texas gained 4 percent, California lost 2 percent.)

They mainly move to find jobs.

The pandemic stalled this movement for a while but now will probably accelerate it as the loss or gain of jobs is uneven across the country. That means more opportunities (and risks) for real estate investors.

The pandemic first prompted a massive drop in jobs in all local markets, but also the expectation that those jobs would eventually return. As states ‘re-opened’ their economies at different speeds it was difficult to compare how well that expectation was holding up locally.

But most states now have similar re-opening policies, so it’s a good time to make some comparison – not just about the short-term economic outlook but about structural job changes in local markets that will have lasting effects on the demand for housing. Some markets will have permanent job losses, others will gain.

Types of Jobs

Overall, 4 percent of pre-pandemic jobs have so far not returned. That includes 2 percent in business services, 4 percent in manufacturing, 4 percent in healthcare, 5 percent in government, and 14 percent in restaurants and tourism.

More restaurant and tourism jobs will eventually return as more people are vaccinated but markets where that recovery is weakest include San Francisco, New York, Boston, and Philadelphia. On the other hand, almost all of those jobs have returned in Oklahoma City, Jacksonville, Salt Lake City, Birmingham and Houston.

Manufacturing jobs will almost certainly be lost in some markets as the pandemic accelerates the automation of factories. Markets most likely to lose these jobs include Seattle, Houston, Los Angeles and Cleveland. But recovery has been swift in Memphis, Madison, Columbus and Omaha.

The Key Indicator

Business services include a wide range of jobs needed by any business, from lawyers, accountants and IT to temp services, cleaning and landscaping. It’s the biggest sector of the economy and has provided the bulk of new jobs in the last decade.

In the pandemic environment it’s the key indicator for where best to expect future growth. The faster jobs in business services pick up, the more likely a market will be a good long-term bet for real estate investors.

This table provided by Local Market Monitor shows the best and worst performing markets so far.

Northport, San Antonio, Ogden, Memphis and Austin lead the pack. Except for Ogden their total job situation is still negative, but that won’t last long.

The worst performers – Las Vegas, Orlando, Grand Rapids, Richmond and Los Angeles – are likely to have a very slow economic recovery and weak demand for housing for years. It’s tough to bet against Vegas and Disney but their job-intensive operations will need fewer people in the future – and less housing for them.

Best Strategies

Jobs aren’t the only thing to consider when deciding where and how to invest. Housing is very expensive these days in North Port, Raleigh, Austin and Stockton, so apartments are a better option there. In Birmingham, Kansas City and Memphis, on the other hand, prices are much lower and single-family rentals are easy.

In Knoxville home prices are low but rents even lower, so apartments are favored here too. In Baltimore population and job growth have been weak for years, so the good news about business services may be the only good news right now.

In Ogden, Tampa, Knoxville, Colorado Springs and Salt Lake City, home prices are close to boom territory – you could be buying near the top of the market – so you need to be sure not to include equity gains in your expected return.

San Antonio, Charlotte and Nashville are the least-complicated investment locations.

And just because the job situation in markets like Las Vegas, Grand Rapids and Orlando is very poor today, you can still invest there – any market has areas that will do fine. You just have to be cautious, which means that you have to stick to the middle of the rent range in whatever zip code you’re considering a property. (And of course we can tell you where that range is.)

This post first appeared on Forbes.com. To see the original, click here.