Visible Alpha Consumer Goods

The real estate market is cooling off, and people are increasingly rethinking their recent desire to purchase a new home. The frenzy of home buying sparked by the pandemic — and spurred on by federal stimulus checks and rock-bottom interest rates — launched the housing market into the stratosphere. But with both pandemic anxiety and prices easing, the market is rapidly returning to earth.

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Luxury goods are, to an extent, exempt from many of the consequences of economic chaos.

“The rich keep on buying” is a prevailing belief, and it remains true thus far. Luxury goods spending was up in the U.S. and European markets even as Covid-19 restrictions contributed to falling revenue in China. The industry’s rapid post-pandemic recovery could stall with both inflation and the threat of recession rising, but industry leaders expect the market to survive, and then some.

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Analysts are forecasting a more opportunistic growth and profitability outlook for U.S. home builders than before the pandemic started. Residential housing is experiencing record demand, as the CEO of Toll Brothers recently stated it to be the strongest housing market in his 30 years of experience. The boom is due in large part to the virus, which increased demand for additional space amid growing work-from-home and social-distancing trends. The timing of Covid-19 induced demand was aligned with an already tight supply of homes and a vast pool of potential buyers, as many millennials postponed homeownership after the 2008 recession. Record low mortgage rates also provide consumers further incentive to purchase a home, and after eight years of consecutive gains in nominal home prices, many current homeowners have profits to move up. Read more