One thing, above all, was relentlessly drummed into me at the University of Chicago’s Booth School of Business: You, private citizen, should not attempt to outguess the market. Asset prices represent our collective best guess about the future value they will return to owners. Those guesses are often wrong. (Predictions are hard, said Yogi Berra — especially about the future.) But your guesses are at least as likely to be wrong as everyone else’s, so there’s no point wasting money, or mental energy, on trying to time your bets.

The past six months have taken much away from me, but they have only built up my faith in this axiom. Had someone asked me in March, I would have predicted that after six months of pandemic, the housing market would be full of panicked people frozen in their homes, except for those who were being evicted. Instead, the housing market is roaring.

I won’t sully my diploma by prophesying some inevitable collapse. But I will outline my short-, medium- and long-term worries about what this reveals.

In the short term, the housing market tells a story of two Americas. One has the educated and professional classes, most of whom can work from home. They’re breaking leases to move to the suburbs or the country; trading up to bigger places; taking advantage of low interest rates to refinance; building additions for the new home office.

Virginia's moratorium on evictions during the pandemic expired on June 23, rattling renters who lost their jobs because of the crisis. (The Washington Post)

The other America has the people whose job requires their physical presence. Many are out of work and worried about how to pay their rent or mortgage; those who still have jobs are stuck in place and worried about getting covid-19. Unless more emergency relief is forthcoming from the government, many of those fears will come true, making the contrast between winners and losers in this economy not merely stark but intolerable.

In the medium term, the story is not of two Americas but three markets: single-family homes, multifamily housing and commercial real estate. In the worst-case scenario — in which there is no vaccine for a long time — demand for multifamily housing and commercial real estate both crash, while demand for suburban, exurban and rural homes keeps climbing.

Even in an optimistic scenario, in which, say, a vaccine is produced by year’s end, commercial real estate may struggle for quite a while. You don’t need to imagine everyone teleworking from such far-flung locations as Ulan Bator; just imagine offices becoming places where employees gather two or three days a week and work from home the rest of the time. In such a world, short commutes become much less valuable, while demand grows for square footage. This would depress demand for office space and cozy, close-in apartments — and activity for all the associated businesses that serve commercial cores, whether hotels or hot lunch vendors.

That adjustment would not be easy. Businesses will fail, taking out personal savings and lifelong work. Bankers and investors will have to retrench, making new projects harder to fund. Some local governments will have to rebuild their tax bases from scratch. Homeowners in megacities, who have come to think of steady home price appreciation as a sort of natural law, may well see their biggest asset lose substantial value.

This brings me to the longest-term story, which played a pivotal role in previous crises and a supporting role in the current housing market: interest rates.

The long, secular decline of interest rates and inflation since the 1970s has been one of the major reasons for the long, secular increase in the value of owner-occupied housing. Just how much interest rates matter becomes apparent when the Fed drops rates to rock bottom. My bank is offering a 15-year mortgage at 2 percent interest. We are in the midst of refinancing.

Over the years, I’ve said that “interest rates can’t stay this low forever” and been punished by the gods of the Efficient Market for my hubris; I won’t make that mistake again. Instead, I’ll ask what happens if they stay this way. The Fed couldn’t lower interest rates further to cope with the next crisis — and banks aren’t going to pay us to take their money.

These are my distant and fuzzy worries, though steadily coming into view: How much of what we consider a “normal” housing market, such as steadily growing prices, is actually a function of the long, slow decline in interest rates? And what does the end of that trend foretell for the people who are counting on selling their house to finance retirement — or the central bankers who are counting on loose monetary policy to finesse whatever future disaster hasn’t yet arisen?

I’m afraid I can’t see an easy answer to those questions. But I can see enough to make me fret.

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