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Recent days have underscored that there are really two American economies. On one hand, as I discussed in this space last week, Congress is experimenting with direct cash infusions to reduce child poverty, which affects more than 1 in 5 Arkansas children.
On the other hand, the Dow Jones Industrial Average closed above 33,000 for the first time last week as Arkansas Business staffers labored mightily to document the explosion in million-dollar homes sold in Pulaski, Benton and Washington counties.
This is an Opinion
Staff writers Mark Friedman and Marty Cook rounded up 108 seven-figure home sales in the state’s three most populous counties (Pulaski, Washington and Benton) last year; in 2019, the total was 68.
And the residential real estate boom has not been limited to the high end. This week, we list 200 real estate agents who each had sales volume of $9 million or more last year; in 2019, our research turned up only 139 agents who reached that sales level. (Real estate sales teams, listed separately, reported similarly improved sales last year.)
Even people who are staying put are making improvements to their existing homes. A friend informed me last week that her preferred cabinetmaker can’t get to her project until August.
What’s going on here? Well, as you can read elsewhere in this issue, it’s a combination of mortgage interest rates that remain stupid low — that’s a technical term, right? — and relaxed lending standards. Add a dash of preparation for a future in which the line between home and workplace remains blurred, especially for the Gen X and millennials who are the typical buyers of high-dollar houses.
Million-dollar homebuyers are presumably not the households that will benefit directly from the $1,400 per person stimulus payments or the child tax credits that were part of the American Rescue Plan that Democrats in Congress and President Biden enacted last month. Those peter out at $160,000 in household income — more than double the national median, but not the kind of income that supports a high-end lifestyle. But they certainly benefit indirectly from the unprecedented injection of federal dollars — borrowed, of course — into the economy over the past couple of years.
Easy credit, whether it’s for student loans or mortgages or the federal deficit, creates additional demand and pushes prices up. The median home price nationally rose more than 12% last year. With trillions of borrowed dollars sloshing around in the U.S. economy, the Federal Reserve said last week that it expects inflation to rise above 2% while growth in the GDP is expected to be a blistering 6.5%. Both metrics benefit from comparisons with 2020. (They may also benefit from comparisons with the last economic recovery, in which liberal-leaning economists thought Congress was too chintzy in its stimulus spending.)
Because I’m a natural-born scold, I have been encouraging young friends and relatives to be deliberate in spending the stimulus windfall they are receiving. Those who don’t need it desperately for basic necessities should set it aside for emergencies or retirement or some big future purchase.
I was delighted, then, to hear Gov. Asa Hutchinson echoing the same sentiment about money flowing to the state as part of the federal stimulus package.
Some state governments have suffered far more during the pandemic than Arkansas — Hutchinson seems to think that’s because they imposed more restrictions on businesses, and he may be right. Arkansas, however, has a budget surplus and doesn’t need the federal money for current obligations. Therefore, the governor plans to invest in the kind of broadband connectivity that Arkansas has been woefully slow to build, as the pandemic revealed.
Arkansas is poised to attract new, younger residents who can work from home in the same way it has traditionally attracted retirees: affordable quality of life. But unlike traditional retirees, these new residents will require fast, reliable internet service, or they will go somewhere else.
Gwen Moritz is the editor of Arkansas Business.
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March 22, 2021 at 12:00PM
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A Virtuous Cycle (Gwen Moritz Editor's Note) - Arkansas Business Online
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