Due to the pandemic, it's good to think about real estate investing by coronavirus positivity rates. The higher the coronavirus positivity rate, the more fearful capital will be. Economic recovery will likely be slower and outside capital will likely stay away.
As a whole, American real estate is some of the cheapest developed country real estate in the world. When you add on how much money you can make in America thanks to the proliferation of world-class companies, American real estate becomes an even better bargain.
Below is The Economist's real house price index. Notice how cheap the United States is versus New Zealand, Australia, Britain, France, Ireland, Canada, and Spain.
The realization of how cheap American real estate is on a global scale should make you want to buy as much real estate as possible if you are an American. After all, before the pandemic began, international investors were gobbling up American real estate for this reason.
The last thing you want is foreigners profiting off your land and pricing you out. Instead, you want to buy property first and then get rich as foreigners bid up property prices. The pandemic has helped keep foreigners at bay, for now.
Real Estate In The Heartland
What international real estate investors interested in America don't really know about is heartland real estate. Instead, international investors focus on coastal cities such as San Francisco, Los Angeles, Seattle, New York, Boston, and Miami.
As a result, Americans have a competitive advantage and a big head start when it comes to investing in heartland real estate.
In late-2016, I made the case that investing in heartland real estate was a shrewd move. Thanks to the internet, demographic trends, Donald Trump supporting his supporters, and the rise of real estate crowdfunding platforms, more capital would naturally shift towards the middle of America.
The pandemic then supercharged my thesis by 3-5 years as the work from home trend becomes more permanent for potentially millions of workers.
However, what I failed to predict was how much residents in the heartland cherished their freedom and their economies over keeping everyone safe from the coronavirus. This is the classic take the pain now or take the pain later situation.
As an investor, it is our responsibility to forecast the future and bet accordingly. And the future of investing in heartland real estate is now looking murky due to soaring coronavirus positivity rates and a potential Joe Biden victory.
The sad reality is that COVID-19 positivity rates are soaring in the South and Midwest. As a result, there is a risk these states will falter, economically. I've shared my latest delta variant investment thesis for you to review.
Real Estate Investing Based On Coronavirus Positivity Rates
When the pandemic began, I discussed in detail the difficult situation all Americans faced between choosing the economy or maybe their lives.
If we keep economies shut for too long, we could see more depression, suicides, domestic violence, and child abuse. There comes a point where the cure may be worse than the virus itself. As a result, it's hard to fault anybody for wanting to open up the economy with safety protocols in place.
Here are a couple of maps that show the intensity of the coronavirus in America. The first map shows the daily cases per million in rural areas. The darker the color, the more average daily coronavirus cases.
The below map is also from the New York Times database that more clearly shows higher coronavirus positivity rates in heartland states compared to coastal states. The exceptions are Florida, South Carolina, North Carolina, and Rhode Island.
Related: How To Get Rental Deals And Better Tenants After COVID-19
States With The Highest Positivity Rates
Below are the 7-day rolling average positivity rates by state from Johns Hopkins University Coronavirus Resource Center. It looks like the second waved has peaked, but heartland states still have the highest positivity rates.
- Iowa – 50.58%
- Nevada – 37.16%
- S. Dakota – 36.37
- Idaho – 29.63%
- Wisconsin – 24.30%
- Wyoming – 20.22%
- Nebraska – 18.03%
- Kansas – 17.41%
- Mississippi – 16.93%
- Alabama – 16.6%
- Utah – 15.44%
- Florida – 11.95%
- Indiana – 10.10%
- Montana – 10.08%
- North Dakota – 9.95%
- Pennsylvania – 9.17%
- Arkansas – 9.00%
- Arizona – 8.59%
- Tennessee – 8.33%
- Oklahoma – 8.33%
- Texas – 7.12% – First state to report over 1 million coronavirus cases.
- North Carolina – 6.36%
- New Mexico – 6.34%
- Georgia 6.21%
- Minnesota 5.95%
- Missouri – 5.95%
- Deleware 5.76%
- Virginia 5.71%
- South Carolina 5.65%
- Illinois 5.43%
- Colorado 5.30%
- Kentucky 5.28%
- Oregon 5.17%
- Ohio – 4.70%
- Alaska – 4.48%
- Louisiana 4.13%
States With The Lowest Positivity Rates
- Maine 0.51%
- Massachusetts 1.13%
- New York 1.16%
- Vermont 1.22%
- District of Columbia 1.26%
- New Hampshire 1.32%
- Connecticut 1.63%
- Maryland 2.3%
- Rhode Island 2.4% (contrary to the map above)
- California 2.45%
- New Jersey 2.85%
- Hawaii 3.04%
- Washington 3.37%
- Michigan 3.71%
- West Virginia – 4.16%
I'm seeing an uptick in people who want to migrate to California and Hawaii, given lower COVID-19 positivity rates. And here's another map from Johns Hopkins that helps illustrate how each state is doing at handling the coronavirus.
If you combine all this data together, it is pretty clear that many Midwestern and Southern states, for whatever reason, are underperforming when it comes to controlling the coronavirus.
Why Are Positivity Rates So Different Among States?
It would be one thing if we were still in the first three months of the pandemic and saw this data. However, after over eight months of lockdowns and with clear instructions on safety protocols, it is interesting to see how divergent some states are in handling the virus.
We all get the same instructions about wearing a mask, social distancing, staying home when sick, not participating in large gatherings, and so forth to protect everyone from the spread.
Therefore, the only logical answer is that the states with higher coronavirus positivity rates must not be following the safety protocols as strictly as the states with lower positivity rates.
In other words, the culture in states with higher coronavirus positivity rates must be more focused on personal freedoms versus following health protocols to crush the virus. This is understandable since the overall coronavirus survival rate is over 99%.
Given more states in the heartland are Republican, let's look at a few Pew Research surveys that ask how Republicans and Democrats view the coronavirus differently.
As you can see from the survey responses, it is clear that Republicans are less concerned about how the coronavirus will impact their health than Democrats. Democrats also look to be much more worried about everything in general.
That said, both parties seem to be almost equally concerned about the U.S. economy. Below is another chart that shows Democrats are almost twice as concerned as Republicans regarding the health of the U.S. population as a whole.
Everything Is Rational
As an investor, we must also try and be as objective as possible when it comes to putting money to work. You can't let your emotions control your decision making. One of the key things an investor should tell him or herself is that everything is rational.
It is rational that many heartland states are seeing a surge in coronavirus positivity rates and deaths because more residents chose personal freedom and their economies over health safety.
It is rational that many coastal states have seen their economies get crushed because residents chose health safety over personal freedom and their economies.
I live in San Francisco, where we've been shut down since mid-March 2020. Our mayor, who kept earning her $342,974 salary and $109,447 in benefits during the pandemic, squashed our city's economy by keeping things strictly closed for seven months.
Even outdoor playgrounds weren't allowed to be open. Due to the lockdowns, the budget deficit has skyrocketed and the poor have gotten even poorer.
However, due to our mayor's draconian measures and residents' more strict adherence to health measures, of the 20 most populous cities in the U.S., San Francisco has the lowest death rate per capita from COVID-19. One UCSF doctor estimated that if the rest of the country followed San Francisco's strict guidelines, 50,000 would be dead from the pandemic so far instead of 220,000+.
Our mayor focused on saving lives over saving the economy. Now, San Francisco is opening up pretty much everything in November at limited capacities. Let's see if the good times last and if the economy can continue to recover.
Capital Hesitation At The Margin
One of the problems with high coronavirus positivity rates in heartland states is that it makes capital pause. And incremental capital investing in heartland real estate is one of the biggest catalysts for higher property prices.
It is too early to estimate how much capital will end up not going to heartland real estate due to high coronavirus positivity rates. But I know from speaking to several people that they are no longer considering leaving California to places like Wyoming, Wisconsin, Utah, and Texas.
I've had friends in New York give me similar feedback about relocating to Florida. Even though there is no state tax in Florida, there is more hesitation now because they don't think they'll feel safe. As a result, these New York City residents have hedged their bets by keeping their NYC properties while testing out Florida living.
We already understand that relocating to a different state just to save money is already hard enough. You either have to be really struggling in your current environment or have family and friends in a new state to not consider first saving money by relocating within your city.
It doesn't make sense to leave your entire network versus just moving 15 minutes further away from downtown to save 20% – 40% on living costs and keep your salary. If there is a vaccine, people will flock back but the opportunities will first be given to those who never left.
To relocate to a different state with fundamentally different political and health safety views may be too much.
Adult Obesity Rates By State
After more than seven months, we also know that obesity and comorbidities are big factors with regard to surviving COVID-19. If you have a respiratory illness, being obese makes the fight more difficult.
I spoke to one woman who runs 20 miles a week who planned to relocate to the Midwest. They could work remotely and wanted to buy a big house to raise their daughters. After several months of mulling the decision over, she and her husband decided against it due to differences in food and health culture.
They feared they would be ridiculed as “coastal elite weirdos” for eating mostly vegetarian, shunning BBQ, and working out all the time. She told me a story of one of her earliest childhood memories of being made fun of by this much bigger girl. She was a bully who would often steal her lunch and call her “twiggy” and “Skeletor.”
Despite being white, she and her husband just didn't feel like they would assimilate in a state with such different philosophies on diet, exercise, politics, and health protocols.
To her, wearing a mask is no big deal because it helps protect her and others. She already gets irked every so often by a mask-less jogger. Moving to a state where there's less mask-wearing during a pandemic would make her feel constantly agitated.
People Just Want To Feel Safe
At the end of the day, people just want to feel safe, which is one of the reasons why the demand for nicer, larger homes is soaring. Some people who were considering leaving coastal states for heartland states are now reconsidering given the positivity rates have completed turned.
Meanwhile, perhaps more liquid capital that could have been invested in heartland states is now being redirected towards coastal real estate again. With the U.S. median home price increasing strongly, partly thanks to higher demand in the heartland, coastal real estate is becoming relatively more attractive.
It may be normal to see hundreds of Ohio State football fans tailgating without masks. It may be accepted that places like Alabama and Texas have fully opened up a couple months before everyone can get a vaccine. However, to some coastal state residents, just seeing fans back in a college football stadium is an anathema for safety protocols.
But again, everything is rational. In a free country, the foundation is to let people choose how they want to live. As investors, we are given the same freedom to choose how we allocate our capital for financial freedom. We have people migrating to California for different philosophical reasons towards the re-opening.
Real Estate Performance Going Forward
I still have over $500,000 invested in a real estate crowdfunding fund with properties throughout America's heartland. Overall, the IRR is about 12%, which has outperformed my San Francisco real estate holdings since I started investing in late-2016. However, I wonder whether such outperformance will continue as coronavirus positivity rates increase.
My feeling is that the outperformance will narrow. Perhaps the overall tide of increased real estate demand due to low mortgage rates and more work from home will trump any slowdown in outside capital looking to invest in heartland real estate.
Whatever the case may be, it’s worth paying more attention to coronavirus positivity rates by state before investing in a particular property. Compare the positivity rate trend to local economic indicators such as the employment rate trend. Once you’ve made a more informed top-down decision, you can then focus on bottoms-up analysis.
There's one last thing to consider. Now that Joe Biden has won the presidential election, I'm assuming he'll try to take care of his supporters as well. Therefore, I expect the SALT tax to be repealed. If so, this should provide a boost to coastal city real estate prices as more deductions can be made.
Overall, I believe American real estate will continue to perform well in 2021 and beyond. The intrinsic value of property has permanently increased due to the desire for safety, shelter, stability, and work flexibility. However, beware of investing in Florida and other Southern states due to the rampant surge in the delta variant.
Only time can tell which regions and states perform the best. In the meantime, I'm happy to be long and diversified in my favorite asset class to build wealth.
Real Estate Investing Platforms
If you are and accredited investor looking to invest in real estate, take a look at CrowdStreet. CrowdStreet focuses on individual properties in 18-hour cities where valuations are lower and rental yields are higher. Due to technology and demographic trends, 18-hour cities are forecast to have faster long-term growth rates.
The other solution for non-accredited investors is investing in Fundrise through one of their diversified eFunds or eREITs. Your returns are more stable as you gain broader exposure to an asset class that is greatly benefitting from low rates and the desire for real assets in this volatile environment. Fundrise was founded in 2012 and is one of the best platforms today.
Both platforms are free to sign up and explore. Real estate crowdfunding accounts for roughly $70,000 of my estimated $300,000 in annual passive income.
Readers, do you think coronavirus positivity rates will affect the way capital is deployed? Or do you think none of this really matters?
61 thoughts on “Real Estate Investing By Coronavirus Positivity Rates: Heartland Beware”
This is a fascinating analysis, Sam. Full disclosure — I am a professional real estate fund manager that focuses on workforce housing in the heartland, so I clearly have a horse in this race! That said, here are a few counterarguments for you to consider:
-I think this is a short term trend. Real estate investments should be made for the long term, and while COVID hot spots will deter people from renting AirBNBs for a few months in the heartland, it won’t deter them from relocating for the long term due to affordability. Let’s not lose sight of the fundamental convictions regarding deep, intrinsic value in the heartland.
-Not all heartland markets are demonstrating similar behavior. Sure, the trends are blatantly obvious in the most conservative states, but they are more muted in places like western Pennsylvania, Ohio, and Michigan. The “heartland” casts a wide net depending on how we define it, but we consider these heartland markets, and the trends, near-term as they might be, are much less alarming in these areas.
-Perhaps the data is skewed by extremely rural states with very few cities. States that are in the heartland but that have significant concentrations of cities, such as those mentioned above, are likely to be more moderate and lean blue, which is likely to result in less pronounced positivity rates.
Again, I’m in Pittsburgh and run a fund that invests in urban rust belt / heartland markets, and we’re seeing multifamily demand go absolutely bonkers. It’ll be interesting to see how things shake out in the coming months!
Thanks, as always, for the super engaging post!
I like this blog but I had to agree with a push back here. While the positivity rates are high in the heartland, the death rates are not out of control in these states. They are often times much lower than in the coastal states. I also take issue with the way the data is arranged… the problem is that the coasts (which are heavily blue) were hit first. This means the virus “burned through” the available population and will reduce the spread rate on future waves. Also, testing ramped up considerably since the first waves so that also accounts for a huge amount of the disparity in positivity. The jury is definitely out on masks… self-reporting is simply not an accurate means to measure data as it’s too unreliable. It’s only good in truly “apples to apples” scenarios which the measures mentioned in the article are not. I’m not an “anti-masker” by any stretch… I tend to wear masks (though I lean red politically)… I just don’t believe there are $1000 bills lying on the ground when it comes to mitigating spread. Ultimately, it’s a balancing act… COVID is a serious risk only to a rather small sliver of the population. There are definitely concerns with depression, domestic abuse, suicidality, alcohol and drug abuse, and untreated-undiagnosed medical disorders. Protecting vulnerable people is important… so is protecting livelihoods. I think with due respect to Sam and others on this blog… most of us are in the “lucky percentage” of folks who can earn money from home. Many others cannot… they are suffering greatly… that needs to be plugged into any and all public welfare equations and our “media betters” and political class too often simply don’t.
Tom, I appreciate that someone here has concern for lower income folks. I am 32 years disabled and receive a sole income of $12,000per year from Soc Sec Disability, and NO other government assistance. That’s one thousand dollars a month. I’m living on the front seat of my car for the past two years because I cannot find an apartment to rent or a house to buy that I can afford on one thousand dollars a month (or I *can* afford , say, a $550 or $650(tops)rent because I am very careful with money, but landlords don’t believe it despite my credit score in the 800s –eg,I’ve been told “your rent cannot exceed 30percent of your income” or “I’d rathr rent to someone with a good work history”, and therefore they won’t rent to me on the RAAARE occasion that I’m able to find an apartment without smoking neighbors whose secondhand smoke ALWAYS permeates from their indoor spaces into my indoor space, making me extremely ill — I have had to move some thirty times in as many years to get away from smoke in housing situation after housing situation (most where the landlord assured me there were no smokers, when there WERE) in a vain effort to find a SMOKE FREE PLACE TO LIVE).
Thanks in part to the financial speculation of people like those participating in financialsamurai.com, compounded by the Covid19 pandemic, house prices have so zoomed through the roof here in TN that a house I could have bought for $120K a year ago is now twice the price. Result? I cannot have a nontoxic situation to live in where I am physically able (because smoke causes me agonizing bodywide pain) to write my book on making the body more resistant to Covid19 and its many variants that already are having medicos extremely concerned, a book that would be cutting edge because it contains information that is NOT available in the mass media, as far as I can see, information I am able to see the relevance of due solely to my own wide-ranging readings in medical and scientific peer reviewed literature and elsewhere, interpreted through the lens of my attempts to understand — so I might be able to heal — my detoxification disorder.
So thanks in large part to real estate speculation by people with a lot more money than I have, I am unable to have housing to write a book that could save many lives and many many cases of long covid. If anyone reading this would like to rent me a room in a nonsmoking and non air-“freshenered”, etc (my body doesn’t detoxify chemicals properly) house, you would be doing something that could help save thousands of lives, as well as my own. Because I honestly don’t know how much longer I can go on, spending hours every day trying everything I can think of to try to find an affordable medically apropriate place to live where I can write the books that could help save lives (and make me enough monney so I could buy one of these “overpriced” houses) and never finding a smoke free place I can afford to live ANYWHERE.
I am a PhiBetaKappa graduate of an IvyLeague-level university, with enough grounding in the sciences to enable me to understand enough to write the cutting edge book I refer to above, but in order to do so with adequate documentation and coherence, I MUST have a bed that I can sleep horizontally through the night in a quiet, dark room with a securely locked door (for the past two years I’m sleeping SITTING UP ON THE FRONT SEAT OF MY CAR) so as to be enabled to have adequate brain function, and I MUST have a desk and chair in the same room so I can do my writing, and I MUST have access to a kitchen where I can prepare nutritious food that is the fuel for proper brain and body function, and access to a bathroom where I can do you-know-what as well as shower after doing the exercise so essential to health but which is going to put toxins on my skin from working out that’ll just be reabsorbed if I don’t take a shower right after so without a shower I do not exercise.
Capiche? Is there ANYBODY out there who cares enough about the world-at-large that they can help me to help YOU????? For privacy I’m entering a “PenName” until (IFF) someone has a plausible situation they can offer me, at which point I would be glad to comunicate my “real” name , references, etc. Please don’t ask me, “What about your family” or “What about government housing” or “what about churches” or “what about nonprofit organizations” or “what about housing groups” or “what about grants” because I have explored ALLL THESE and many many many other avenues of potential help that are SUPPOSEDLY out there and they are NON-AVAILING or I would not be writing this plea on this board — please only write to me if you SERIOUSLY have a CONCRETE PLACE meeting my above needs, and wish to get more info about me with the serious intent of renting to me if I check out. TYIA
Sorry to hear about your situation and I’m bummed your family isn’t willing to help you out.
As a non-Ivy league, public university student, I’m willing to help you out if you want to shoot me an e-mail. See the About page. Thanks
Maybe higher COVID rates in Red states has to do with record number of in person voting
Real estate is reaching all time highs again. I’m selling one of two properties in the DC/VA area to cash out. Still believe renting in SoCal near the ocean is the best of both worlds if you can remote work. Do you think pumping that cash back into real estate is the best way to preserve growth, outside of the stock market? Where would you buy between SF and SD, given the exodus of tech from the big cities?
I think you touched on an area that has been largely ignored as to why the U.S. has so many cases/deaths compared to other countries. Obesity in the U.S. is at 50%. With obesity, hypertension, and diabetes being 1, 2, 3 in highest risk co-morbidities it makes sense that the heartland is where the highest number of cases have been occurring. Tons of obese individuals in those states (no pun intended)
Take a look at Vietnam and Thailand. Obesity rates are under 5% and Vietnam borders China. You’d think they would have mass deaths being so close to where the outbreak occurred. Also, I have yet to see a single college or pro athlete die from this disease. Bottom line, this country has far too many fat asses.
I’m 47, workout 6x a week, eat healthy, wear my mask only where required (stores and the gym), and have traveled recently by plane twice to Idaho and once to Chicago. I’m pretty confident that even if I do catch it that the symptoms will be mild or not even know I have it. If more people were like me, or just simply kept their waistlines in check by controlling their portion size, we’d probably have similar number of deaths as Vietnam.
“overall coronavirus survival rate is over 99%”
One thing that I see most folks fail to mention there is a large percentage of folks that get that have permanent damage afterwards. I know a few people that got in spring and are still suffering with difficulties and has impacted their functioning greatly. I think the impact to this is worse then deaths and will lead to more deaths down the road overall in the population that is unaccounted for.
How do we know it’s permanent if it’s still only under a year? I’d be careful make this sweeping assumption so early.
I have lived in many cities and what I have noticed is that wealthy people are not obese and take care of their body and have a strict diet and exercise daily. Poor people are obese and do not exercise. Hence the reason they are the ones suffering with Covid-19. I am just saying.
Your logic is a bit flawed as you seem to chalk it up to solely personal responsibility. The topic is too complex to have such a myopic view.
Education levels and poverty have huge impacts on obesity rates as well as the food environment.
I would love to see you write about life insurance, does it make sense to get it, and whether to select from employer offering or shop in open market.
“Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.” -BF
Feeling safe is an interesting concept. I am curious if you’ve reached out to anyone in these danger zones to get their perspective?
“Therefore, the only logical answer is that the states with higher coronavirus positivity rates must not be following the safety protocols as strictly as the states with lower positivity rates.”
Alternatively, states that are now Doing ok are the ones that screwed up initially (NY, NJ, PA, WA) and now have some measure of herd immunity.
Herd immunity would be nice. But I doubt it. It’s hard not to screw up in the beginning because everything is so new. But after 7-8 months, we have a better idea of what’s working and what’s not.
But the reality is, we’re the United States. So hopefully we’ll act more like a unit as time goes on.
Not mention emerging evidence is showing immunity may not last long as people are getting re-infected along with evidence that antibodies may be doing some of the attacking of the immune system.
Agree, maybe not full “herd immunity” but the states the screwed up initially had minimal testing capacity to track and trace every case that was in those states at the time. Had the same hit happened with the testing capacity now, I would really like to see the number of cases in NY, NJ, PA, and WA. Treatment has also come a good way since then. I think all circumstances considered if the same outbreak happened in those same states today we see higher case counts than reported in those states compared to where they are currently at, but we would see a decrease in reported deaths given the advancement in bed capacity and treatment progress.
NY was also sending COVID patients into senior homes initially. I think we all agree that is a very poor idea now.
100% agreed. This is a great point that’s not talked about often. Testing was extremely limited during Jan-March compared to today. For example, in the first week of March, the confirmed and reported cases were less than 100 per day. But it’s pretty safe to assume that the number would’ve been much higher if every state had today’s testing capacity.
By April, the new case per day was reportedly around 26,000 but again, testing still wasn’t widely available like it is today. Each states protocol, preparation, availability varied. I know in VA, it wasn’t until May when the local counties ramped up their testing capacity which was behind states like MA, NY, or NJ.
So whenever I read articles about “record numbers!” “new cases surging at all time highs!” I just have to take it with a grain of salt (just to be clear, I’m not downplaying the seriousness of the pandemic).
Those initial states were getting wrecked before it was either known to be an issue and thus circulating for quite a while under the radar as well as before mask mandates and other public health info advice was given.
To be clear- obesity lowers the ability to successfully fight any respiratory illness, not just covid related infections.
Working in hospitals taught me how poorly the general population understands infection transmission. Visitors of patients on isolation precautions would routinely ignore instructions for PPE, or smile sweetly and then promptly remove masks once inside patient rooms. They also touch everything- including oxygen tubing/ nasal cannula, use the patient’s private washroom, refill the water glass for themselves and loved one using the sink in the bathroom, adjust the curtains, share food, personal items, etc. Of note, many staff including physicians would ignore isolation signs upon entering patient rooms- though tolerance for this behaviour has probably waned. The same infectious patients were allowed to leave their rooms whenever they want (wearing a mask) to go outside for a cigarette or go to the cafeteria to eat- the whole isolation game was a farce. Only so much of this could be policed as anyone can understand how chronic short staffing hinders the ability to enforce consistent policy. Patients also have rights, including checking themselves out if we tell them they can’t leave their rooms. But this is Canadian policy and universal health care. Sounds like a lot of this non sense has been clipped when I talk with former co-workers, but I can’t say for sure because I stopped working before the pandemic hit.
Who knows why rates are higher in the midwest? There are probably variations in human behaviour that are difficult to predict or model. Most likely it’s related to socioeconomic factors or different structures/ funding in health care delivery.
I don’t think covid positivity rates are negatively affecting real estate in Canada. House prices are holding and gaining everywhere, albeit at different rates. There is some speculation prices will drop in the prairie provinces (low covid rates) but this is due to a decimated energy sector. It’s probably still a buy because of Canada’s vast immigration policies or if bullish on oil recovery.
Who knows why rates are higher in the Midwest? As an American, I know why. It’s because of a lack of following safety protocols. It’s discussed in this entire post.
Thanks Meghan- I’m pretty sure that politely referring to socioeconomic factors which include poor adherence to public health directives covers that.
Why are rates higher in the Midwest? Based on my observations, living 59 years in rural Indiana, my Republican friends and neighbors, well-off or poor, college educated or not, blindly follow the President’s lead. Republicans in Red States are passionate party loyalists, facts be damned. Leslie Stahl, in her 60 Minutes interview, hit the nail on the head when she reminded Trump that his supporters love him and will do whatever he tells them, so why won’t he tell them to wear a mask? It’s so sad and didn’t have to be this way.
Just replying to above saying spot on about party loyalty leading to major problems, this is easy to see.
So true and goes a long way towards explaining why the inner cities in most major cities are disaster zones. The populace often votes against its own interests.
Care to elaborate? Perhaps you could start be explaining what the interests of the inner cities are and then show how their voting patterns don’t match their interests.
Well, you could star with defunding the police. That went over well in Minneapolis. Becoming sanctuary cities is another.
I wanted to commend you on this article. You articulately explained both sides views of the pandemic without shaming or name calling. A rational and thought out theses about investing in the heartland versus the coasts giving credence to both sides. Who would’ve thought this could happen in 2020?
The home has never been more valuable than right now, especially if we go into a second lock down.
A nice home rocks! And I agree with you that Capital will hesitate in going to heartland real estate now and just take a wait and see approach.
Capital is always liquid and hunting for returns.
I agree real-estate should continue to rise. People who can afford to do so want to be in a comfortable home or want to make their existing home more comfortable. Overall we will be spending more time at home in the months ahead.
Re: rationality…it seems irrational to paint or compare coastal vs heartland cities with such a broad brush. There are GREAT real estate values in both and some real dogs in both. There must be more laser sharp evaluative tools to select the best real estate deals in all parts of the country – pandemic or no pandemic. For example, student housing in large (Big Ten, SEC, Pac 12) schools with large endowments and quality (well funded) graduate programs will thrive in my estimation. Example, Clemson has just lifted a moratorium on building and investing opportunities are there. The pandemic has killed many small midwestern liberal arts schools. Some are shutting down. Those students will head for the bigger school increasing enrollment and need for even more housing. Through Crowdfunding you can live where you want (I chose Sacramento area) and invest where you want. I love it. Thank you Sam for good writing on Crowdfunding.
Thanks for the perspective Sam. Thoughts on benefits of removing the SALT limitation being somewhat neutralized by tax increases? With businesses shut down states are going to be hard up for revenue and property taxes seem like an “easy button”. Increased marginal tax rates will be on the horizon as well. Does that change your investment thesis at all?
It will be interesting to see how much taxes go up to pay for budget shortfalls. Perhaps there will be austerity measures and governments will cut salaries, cut services, and cut headcount. But hard to say given bloat generally gets more bloated.
In terms of income tax rates, if the threshold is $400,000 per individual before rates go up, and $650,000 for families, that really doesn’t affect many people. Therefore, no big deal.
A bit random Sam, what do you think of James Altucher’s blog post on NYC is dead?
James speaks in hyperbole. NYC is coming back strong and I’m bullish on big cities.
I totally agree with Sam that everything is rational. It is rational that many states have higher positivity rates and deaths because more residents chose personal freedom and their economies over a slightly lower death rate. They made their bed and are laying in it and most of all, are probably OKAY with it, even those who consequentially contracted covid-19 arguably as a result of their choices. They are reaping what they sowed, that is, reaping the benefits of keeping their personal freedoms and open economies at the expense of a higher risk of infection. Most importantly, it’s their prerogative to make this choice for themselves and assume the risk if they wish. If someone feels uncomfortable with this environment, she has the choice to move to an area with other like-minded folks who want more restrictions, but to try to force everyone else to change their risk tolerance and accommodate for him/her is selfish and entitled. (As a side note, I have heard the argument many times that not everyone has “a choice” to move and that this choice is a luxury others don’t have. My answer is that yes, this choice is easier for some than it is for others, but that’s because this is a capitalistic nation where people are not guaranteed equal outcomes. However, everyone in fact does have a choice. It’s just that some are not willing to make the sacrifices that are needed or incur the necessary cost for this choice to happen because perhaps the sacrifice or cost is too high based on their judgement. However, they still have a choice unless someone has a gun to their head).
As for where I plan to invest, my answer is based on my strongest suspicion that the virus will be a slightly different strain each season. As is the case for the flu vaccine, any coronavirus vaccine developed in a given year will be based on a prediction of the following year’s strain. As folks know, the flu vaccine is hit or miss, sometimes being unable to successfully predict a majority of the following year’s strains. Hopefully, the coronavirus mutation location/rate won’t be as bad as that of the flu virus, but under this theory, covid-19 is here to stay in some form another. The only way to remove restrictions in a way that appeases everyone is to roll out reliable test kits at a massive scale so that institutions and establishments can test everyone that enters their doors. That way, only people who have the virus are restricted, and over-broad restrictions are not burdening the other 99% of the population.
With the above assumption, I would avoid investing in the coastal cities, as they are likely to have the more restrictive policies that will stunt their economy to a greater extent than those of the heartland regions. The non-coastal regions have already made it clear with their choices that the less than 1% death risk is not enough for them to shut down their economies. If Covid-19 is here to stay for the indefinite future, my money will go to the non-coastal regions that have the better chance of a stable economy. A region at risk for sudden/extended business closures, curfews, and bans is not stable compared to a region that has accepted the less than 1% death risk as the cost of living life in 2020 and is likely to continue to accept this risk into the future. Furthermore, we’ve only been dealing with this virus this year. If my theory is correct that Covid will never be over, how long will it take for many coastal city residents to no longer be able to tolerate the restrictions? At that point, they can try to pressure their governments to ease restrictions if they have a sufficient critical mass of support, or they can move to a place with fewer restrictions, i.e., heartland. It’s probably easier just to move than to try to change policies. For that reason, in the scenarios I can think of, all roads point to heartland.
(As background, I have lived in Chicago for 8 years now after having lived primarily in coastal cities all my life. Chicago, although technically heartland, has restrictions at the level or exceeding the level of the coasts. The economy is tanking, and law suits and temporary restraining orders against the governor of Illinois for excessive restrictions are piling up. Bankruptcy numbers are one of the highest in the country. We enjoy living here for now because of what Chicago has to offer (however long that will last), but I would never invest in Illinois real estate during these times).
Well stated. However, coastal cities are primarily professional service industries where working from home is an option. I think tourist town near large metros are going to be a great place to invest. We are already seeing record home purchases in Colorado ski resorts.
You may want to check out Hawaii. Highest unemployment rate, and #1 industry is tourism, which obviously got crushed. Hawaii had/has some of the strictest lockdowns in the country. And I’m looking to buy.
Everybody wants to be safe. Safety means different things to different people. To conservative types, safety prioritizes the freedom to provide for themselves. To liberal types, safety prioritizes being protected from the disease.
Everything is rational. Beside my own emotional irrationality, I’m always looking for and worried about the one hidden factor that blows up my hypothesis about a market’s valuation. Right now, it appears that 2021 will be a very hard year for the housing market fueled by rupturing evictions and an interest rate that’s topped out for all who can afford homeownership. Still, I think Heartland will be the best off of all real estate nationwide, COVID cases be damned.
Good point on eviction moratoriums ending in 2021. I bet there’s going to be extended help. It can’t just go from 100% support to nothing. It’s probably going to be a slow band-aid removal. But it might be even more renter support if Biden wins.
It’s going to be ugly either way. If extended, it will increase the default rate on rental properties, adding inventory, giving those in a good position the opportunity to buy up some great deals. Rich get richer, poor get poorer, and we’re all going to be clenched for about 12-18 months. Unless, of course, you own a blog :)
The percent death rate WAS easy to find on the CDC until the current administration saw the data as a problem. Now it is hard to find on the CDC website without some digging. To save you some time, the WHO has a webpage explaining the deference in the flu vs covid. On the webpage , the WHO explains the death rates. Sorry I over estimated the flu. It’s death rate is .01%
Source: Coronavirus disease (COVID-19): Similarities and differences with influenza
Positivity rates are also higher due to increased testing and many are asymptomatic and do not die. 99.99999 survival rate.
The lock downs should have never happened and those at risk should have isolated themselves. NOT the young and the healthy.
In states, where masks are worn and where restaurants have have been closed, they are still seeing a spike in cases!
Masks just give a false sense of security. And kids are being ruined by on line learning because many need to be in a classroom.
The insanity needs to stop! The survival rate from Covid is high and it has been politicized to the detriment of our children and adults. On line learning, alcoholism, job loss, suicide, etc., etc.
Instead of all the fear mongering, the medical community could have seized upon this diseases as a learning opportunity.
To teach us that a strong immune system along with no comorbities is the best way to tackle this infectious disease.
We are CHRONIC consumers of carbs, starches, sugars and seed oils, which leads to inflammation. If we ate a proper human diet like our ancestors did, which would result in fasting, we would be healthier as a nation!
Covid and many other diseases would not be a death sentence but a minor inconvenience.
This is the real tragedy. Dietary guidelines will not change and we will continue to be fatter and or sicker which is why healthcare costs are through the roof!
There are no financial incentives to educate people on the proper human diet. Big pharma, the medical procedures and corporations make billions off our misery.
I was fat, pre-diabetic and I was miserable! I no longer am none of these by having educated myself!
What we should eat to make ourselves healthy is counterintuitive to everything we have been taught.
Diet is key to beating and surviving this and a lot of other diseases!
Hopefully more people get fitter this year given what we know about how much more difficult it is to battle the virus if we are already unhealthy.
Where are you based and how is your city and state fairing?
Where do you get the idea that masks provide a false sense of security? There’s no downside in wearing masks and they sure seem to lower transmission rates based on the data.
I have to agree with you focus on reducing obesity – it seems odd that this hasn’t been a focus on reducing the impacts of COVID. Then again, it seems odd that the country is in lock-down over “only” 200,000 deaths but we knowingly and legally end more than 800,000 lives annually thru abortion and everyone seems to think that’s woman’s right.
I think there’s a huge wake up call in this nation that we have got to eat better and exercise more. Now, our lives are even more dependent on better ongoing health.
But we also live in a country where we’ve become more sensitive to criticism. So it’s a difficult line to walk on. I’m just going to have to lead by example for my own kids. Losing one’s health is the worst.
I disagree that there is no downside to wearing masks. There are some downsides, though some may just view these as minor inconveniences. I have small children, and I worry about the lack of facial expressions that they are seeing. I’ve noticed that my baby does not respond without seeing mouths move and smile. Socially, small talk and joking is much harder, not being able to discern facial expressions or even hear people. I know these seem trivial, but they are downsides.
How about just taking off your mask when you’re at home and playing with your baby? It’s not like you’re outside in a public place with your baby for a long time, or are you?
I joke around and talk to my friend without a mask when we play tennis outdoors. We’re just many feet apart.
Geno- YOU ARE SOOOOOO RIGHT!!! And why isn’t our government talking more about our health issues at this time?!?! This is why China is fighting this virus- they’re healthy in terms of their weight/inflammation issues!!!! Too much money in lobbying in the US for bad food companies and Big Pharma I guess!
Changing our entire food industry and American lifestyle in a matter of months? I know people in the south that would revolt if you took away their BBQ and McDonald’s. You think wearing a mask is a big ask! haha.
Do you think Trump would ever tell people to change their diets? That fat SOB would have gone down hard from Covid if he weren’t rushed to the hospital with the slightest fever. Had Trump been a poor Kentuckian with the same diet and body.. he’d be dead.
The reason this Covid thing is a crisis in the US is our healthcare system isn’t equipped to treat all the fat unhealthy people that if they all got Covid at the same time, would be a catastrophe.
I do think moving forward things need to change. But look at the pushback Michelle Obama got trying to make kids eat healthier and exercise?
Even among fat people the fatality rate is nowhere near 100%. I would also add that Trump is far more energetic for his age than most Americans even if he is overweight. This is a crisis in the US for the same reason it is a crisis in Europe where cases and hospitalizations are rising faster than in the US, France being a prime example. And the obesity rate in Europe is far lower than in the US.
The Chinese have shown how to contain the virus but no western nation has wanted to listen until now and even at that only one. Slovakia is scheduled to test their entire country this weekend. Less than complete lockdowns (i.e. everyone stays indoors, grocery stores are closed) have now shown as evidenced by the accelerated rates in Europe to do nothing more than slow the progression with a return to previous infection rates at even the most gradual reopening.
It is a shame that the Chinese methodology was modified when lockdowns were first utilized as I believe we can all agree that life in China is currently infinitely better than in the West.
I have not heard any new ideas from Biden – the status quo will continue. I suspect in a few months we will hear Biden telling us how great a job his administration is doing just like Trump does every five minutes.
“We can all agree that life in China is currently infinitely better than in the West”
I guess that would depend on whether you are Uighur or not.
I have traveled extensively in Xinxiang and I can assure you that even for the Uighurs life is much better than it is in the West right now.
I’m always skeptical of people like you that are so certain you are correct 100% after reading some blogs about how seed oils cause all the health woes of western civilization and if everyone just spent 10 minutes in the sun without sunscreen and got their vitamin D for the day they would all have kickass immune systems that would fight off polio with no need for a vaccine.
I always believe the middle ground is where the truth lies.. and wearing a mask, eating better and yes, locking down to avoid hospitals being over-run is even sometimes necessary. But seed oils, lack of zinc and vitamin D, and obsesity all play a factor into why Covid can take advantage of our immune systems and cause cytokine storm havoc on our bodies. I also think our doctor’s have figured out Covid isn’t a death sentence… unlike back in March when they were unsure what was going on. How else did a fat old guy like Trump and Chris Christie survive? Because doctor’s know how to treat Covid now if you come into the hospital before your are on death’s door.
The problem is our healthcare system won’t admit everybody the instance they break a fever like in Trump and other politicians cases. They make you fend for yourself at home. And most families and individuals aren’t equipped with the resources to fight Covid on their own. This is why Covid is so dangerous. Unlike the flu, where staying hydrated pretty much guarantees you’ll recover fully. Covid is much more insidious in the way it attacks your body. So, don’t be so quick to just call this a flu and an overreaction. The jury is still out on that. Let’s reconvene in 2021 and see where things stand.
99.99999 survival rate + 226k deaths would mean that 2.26 trillion people have had COVID in the US.
You need to work on your math…
Sorry – the rest of what you had to say didn’t matter after your ridiculous first statement.
Facts don’t lie!
And of those 226,000 deaths, how many were actually COVID caused!
Not what was reported.
This has been politicized and Il is a great example!
Jelly belly Pritzker just shut our restaurants down again! And the numbers don’t bear his actions !
Spare me “out of an abundance of caution” crap!!!
Business’s and lives being destroyed by these elitist do as I say not as I do politicians!
If masks work then wear it! I choose not to bc I’m healthy. So don’t fret over me since your mask works!
And as this article relates to real estate, Illinois is a horrible place to invest in real estate. The taxes are exorbitant and crime thru the roof!
I’ll be one to leave as soon as I can!
Studies show the total deaths are higher than reported due to covid. Actual evidence.
Sure, dont wear your mask and take precautions. Just dont come to my hospital and ask me to put my life at risk to take care of you when you are having breathing problems. If you get covid, stay home and see if you make it if it’s a 99.99999% survival rate.
This is similar to the obesity problem where ppl need healthcare after a long life of not taking care of their body. But in this case, COVID can kill the ppl taking care of the patient.
It certainly is interesting how the infections rates vary so much from state to state. I feel fortunate to live in San Francisco where the infection rate has been low so far. Most people I’ve come across on my outings are all wearing masks.
It will be interesting to see if the higher outbreak states like those in the midwest continue to rise or if they improve their safety protocols and see outbreaks go down.
Fascinating on how “affordable” US real estate is in relation to big overseas markets!
I suspect the positivity rate’s effect will be short lived. Biden’s higher taxes and the ability to work from home should drive many higher wage earners to lower cost states, especially those who are part of the FIRE movement.
As Europe is quickly illustrating lockdowns only work to temporarily reduce cases unless the lockdown is strict like China. Anything less and you end up with a France or Czech Republic. I suspect California will be the same. Unless cases drop to zero, any opening up is going to result in outbreaks.