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This week: Coronavirus Third Wave; Housing’s Boom and Bust; Are the Polls Wrong?; Where the Media Would Miss Trump; Reading List.
Coronavirus Third Wave
The number of daily confirmed cases in the USA has been rising rapidly in recent days and will soon exceed the peak of 78,000 recorded at the end of July. Daily deaths lag by three weeks and have been holding steady in the 700 to 750 range (7-day average). However, we expect that they will start rising to exceed 800 by Election Day and 1,000 in later weeks.
On the other hand, there is a possibility that the rise in cases is not entirely “organic” if it resulted not from an underlying increase in infections but instead from schools and other organizations requiring tests from asymptomatic students and employees during the back to school period in September-October. If this is the case, we would expect deaths to remain more or less steady below 800 and the ratio of deaths to confirmed cases to fall below 1.5 from its current 1.75 (see chart in last week’s Wednesday Briefs).
Meanwhile, the University of Washington’s IHME predicts (base case) as many as 390,000 total US deaths by February 1st. If borne out by reality, daily deaths will exceed 2,000 on several days and will average 1,700 in the next three months, significantly higher than the current sub-750 level. The IHME says that widespread mask wearing could cut the cumulative death toll by as many as 75,000, down to 315,000 by February. Though still alarming, these more recent projections are less dire than the IHME’s numbers of last month when it predicted 410,000 total deaths by the end of the year. The current base case projection for year-end is 315,000, or reduced by nearly a quarter from last month’s projection. See the IHME’s chart here.
Housing’s Boom and Bust
During the financial crisis of 2008, the number of new homes sold and the pace of new home construction crashed to their lowest levels in fifty years and then remained there for a decade (see chart from the St Louis Fed). There was a rise in multi-family home sales but not enough to offset the decline in single-family. Now, the pandemic has brought a new jolt to the market. The combination of super low interest rates and of migration to lower density suburbs has created a spike in the sale of single-family homes, both new and existing.
Since this cannot presumably be attributed to second-home buying or to new household formation, this gain must be largely offset by a loss in other residential markets. In New York City for example, apartment vacancies have risen ao much that some landlords are now offering two months free on new leases. This type of offer was used successfully in the past to forestall any lasting decline in nominal rents since it has a built-in snapback to the previous rent within a year or two. But the strategy only works if the local economy recovers within a reasonable time frame, say twelve to eighteen months.
Because New York City’s real estate market was prematurely written off several times in the past, only the brave would bet on its demise this time around. But we also have to be cognizant of two factors: 1) a sticky correction has not taken place in several decades and is in theory overdue and 2) a Biden victory could increase New York City’s all-in tax rates to levels that will drive more residents away.
Are the Polls Wrong?
We will find out on Election Day whether modern polling is worth anything when it comes to presidential elections. Some polls show Vice-President Biden ahead across the nation by double digits and ahead in swing states by mid-single digits. But polls also showed a solid lead for Hillary Clinton at the same stage of the campaign in 2016. Did most pollsters make the necessary adjustments to avoid a repeat of their 2016 debacle?
Not according to the people at “polling disrupter” Trafalgar Group who called it correctly for Trump four years ago and who are expecting his victory again this year. Among polls compiled by RealClear, only Trafalgar is showing Trump in the lead in the key states of Michigan and Florida. Trafalgar’s deviation is particularly stark in Michigan where it sees Trump ahead by 1% while all other pollsters see Biden ahead by 6 to 11%, and in Arizona where it has the President leading by 4% instead of lagging by 3% to 7% according to others.
Our own view is more circumspect. It is probable that after 2016 other pollsters have made the requisite adjustments to their methodology. If not, we would expect them to make the same decision as Gallup and to quit Presidential election polling altogether after missing another Trump victory by a mile. (Gallup still polls for the President’s job approval but not for voting intentions).
Where the Media Would Miss Trump
In an unspoken way, every news media outlet is benefiting from Donald Trump. Sure, the editors and anchors at many places profess to oppose him but one thing is undeniably clear: Trump has been a boon for the news business, mainstream or otherwise. The infatuation with Trump cuts both ways, profiting both friend and foe. In this must-see presentation, Matt Taibbi tells of a news channel that opted during the 2016 primaries to show an empty lectern awaiting Trump rather than switch to another candidate speaking live.
Between 2015 and 2018, combined revenues at CNN, MSNBC and Fox News grew from $3.9 billion to $5.3 billion (chart in this article), a clear acceleration from the previous three years. The New York Times’ stock has quadrupled in four years. And contributions have grown significantly at non-profit news organizations such as Pro Publica.
A lot of anchors and editors would celebrate a Biden victory but the bottom line might not be as peppy in the next four years. You can’t have everything.
MORE READING >>> The Trump bump in the news media: commodifighting Trump
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