Last week, I wrote a blog about the US markets that are likely to see the most impact due to the COVID crisis. This week I want to focus on the markets best poised for a strong comeback.
I recently heard Moody Analytics’ Senior Economist Adam Kamins sharing his insights on the factors that will hurt or help specific markets on their road to recovery from the huge economic setback caused by the COVID-19 outbreak and shutdowns. I wanted to highlight the key points that Moody’s shared via this blog so investors can be better informed when choosing markets for investments and also avoid moving capital into markets which are likely to see a large correction in the coming quarters.
Here are some of the key factors he mentioned in his report.
Population Density
Most densely populated cities like New York, San Francisco among others are less likely to recover soon. The population density obviously has been a huge issue with infection rate and this will contribute to slowdowns in reopening these cities. Summarized are the most densely populated counties in the graphic below.
Reliance on Tourism and Hotels
This one is a no-brainer. Cities like Las Vegas, Orlando, New Orleans are going to be more affected because they are tourism heavy, they primarily depend on leisure and/or business travel.
Think about the hundreds of conventions in Las Vegas hotels which will not happen for a while…
How many people are going to be excited about going to Disney World or Sea World in the near future?
These places are going to be “petri dishes” for COVID infections and most people are likely to avoid this in the reasonable future or most likely until a vaccine is out. Regardless their recovery will be impacted heavily. Some of the most vulnerable metro areas are predicted to be New York City, NY, San Francisco, CA, Las Vegas, NV, Honolulu, HI, New Orleans, LA, Miami, FL, West Palm Beach, FL, Orlando, FL among others.
Level of Educational Attainment
This was an interesting one for me to learn about which made perfect sense. Educational attainment lends itself to more high-wage jobs. Tech has been the key differentiator between places that have struggled and those that haven’t as much.
High degree of educational attainment coupled with low population density – cities like Austin, TX, San Jose, CA, Durham, NC, Seattle, WA and Minneapolis, MN were better positioned for recovery. Reason, these cities have seen less disruption because they are more heavily based on white-collared industries like Technology.
On the other hand, cities which have a high reliance on blue-collared jobs (think Detroit, MI) which generally equates to lower education levels are likely to recover slower.
Highlights of smaller metros that are best for recovery are based on the combination of high educational attainment and lower population densities based on Moody Reports. These are in the top left quadrant of the graph below (not in any particular order)
1. Durham, NC
2. Austin, TX
3. Madison, WI
4. Des Moines, IA
5. Omaha, NE
Here’s a graphic that highlights ” The US Metros in the best and worst positions for pandemic recovery”
There were some unexpected cities in the list that are positioned for recovery – Des Moines, IA and Omaha, Nebraska that really stood out. Although you don’t think of these as booming cities that we hear about all the time, these cities are strong in the financial sector (banking/insurance industries), have a fairly well educated population compared to their surrounding areas, and get this – low population density! More room to spread out! This is a key factor coupled with the number of white collared jobs.
Now that most of us know that work can be done remotely, more work will be done remotely, so why not live in a place that you can afford more for less and still be in a city where the demographics are favorable?
Right? Who’s packing to move to Omaha now?! Join the Investor-Extraordinaire of our times? 😉
During the Global Financial Crisis of 2008, the first places out of the recession were the big densely populated global cities. But this time, depending on the duration and the eventual outcome of the COVID-19 outbreak Moody’s predicts that big densely populated cities are going to be viewed as inherently risky and hence less likely to recover soon. An educated workforce coupled low population density is likely the recipe for success on this road to recovery for US cities.
PS: Being a long-time resident of Austin, TX and a Residential/Commercial Realtor I’m really excited to see that Austin, TX is in the best cities list! If you’re looking for investments in Austin and surrounding area you know where to reach out! 🙂
