Volatility Remains a Reality: 2020 took investors for a wild ride. It is helpful to remember the reality of volatility and what it can look like even in a good year. Consider the below chart, which presents basic data of the S&P500 since 2008. There was only one year (2017) wherein the S&P did not have a down month. Yet there were only two years that clocked negative total returns. The challenge of managing risk for returns remains ever present. This chart is a helpful reminder of that reality in numbers. Many will not need help remembering the reality in emotion after the past year.
Aging in Place: The housing market continues to have a shortage of inventory, selling above asking prices. One of the reasons: Americans are holding onto their homes longer. This has been a trend in the making for some time (as evidenced in the chart below). However, the pandemic certainly seems to have solidified the trend. In 2010, the average homeowner stayed in place for 8.7 years. As of 2020: 13 years. With this trend contributing to the housing shortage, chief economist of Redfin comments, “We are in a really huge supply crunch… It becomes a cycle where people don’t want to move because it’s so difficult to buy a home, and then that in turn makes it even more difficult to buy a home because people aren’t moving and freeing up inventory.” On the brighter side, the housing sector finished 2020 with solid momentum as housing starts exceeded expectations, accelerating to their fastest pace in more than 14 years. This news comes alongside more good news of an increase of building permits (a leading indicator of housing construction activity). How much and at what pace these new homes offset the shortage remains to be seen.
Steep Rise for Assisted Living Facility Costs: We’re aware of the significance assisted living facilities held during the pandemic. Though a less-known fact that ensued from the past year is that all long-term care costs rose sharply, for assisted living facilities especially, where rates grew 6.15 percent for a median cost of $51,600/year ($4,300/month). Some of this is attributed to the rising costs of things like home health aides, private nursing homes, or semi-private rooms.
Go Where You Love. Buy What You Love: Strikingly, we encountered two separate articles recently advocating the financial sensibility of pursuing what you love. The first comes from The Atlantic, introducing us to the notion of topophilia, meaning love of a place. As many moved to complete remote working scenarios, they have also found the freedom to choose with more precision where they would like to live, rather than where they would need to live. In the second article from Behavior Gap, the financial benefits of buying what you love are explored. The short version: Consider that if you love something and you’ll use it, you’ll save not only money but retain the cognitive and emotional energy you would have used to replace the thing once a year. Buy what you love. If you don’t, you’ll end up hating, and replacing, until you do.