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Will the Growing Delta Variant Affect the Economy?

Will the Growing Delta Variant Affect the Economy?

3 min read
Matt Myre

Matthew Myre is the founder of PurpleCup Digital, a web design and digital marketing agency. He’s also a former real estate agent and a freelance writer specializing in real estate economics, news, industry analysis, and more.

Experience

Matthew has over ten years of experience in SEO, digital marketing, content marketing, web design, and other related subjects. In 2019, he entered the real estate industry as an agent, later to become a writer for BiggerPockets and other real estate firms throughout the US.

In 2020, just as the COVID-19 pandemic started, he started PurpleCup Digital and began working with different firms such as nonprofits and consultants. Since then, he’s been able to help clients, both new and long-time established, elevate their marketing systems and redesign their websites.

He’s also attempting to establish himself a YouTuber, where he speaks about productivity, managing workflows, and developing better lifestyles. These topics are also written about on his young personal website, matthewmyre.com.

Matthew spends most of his time reading, working on projects, and enjoying time with friends and family. He’s also an avid Monopoly player.

Press

Matthew contributes to BiggerPockets and other real estate publications. He’s been featured from time-to-time in publications such as Realtor.com for his thought leadership in real estate digital marketing.

Education

Matthew is self-educated in web design, SEO, and real estate and is currently pursuing a J.D.

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For the last couple of months, it has looked like we might be past the worst of the pandemic. In most of the country, mask mandates have been lifted, the vaccination rate climbed steadily, and new cases and deaths declined.

A sudden burst of new cases caused by the highly contagious COVID-19 Delta variant has caused the CDC to reverse its guidance and encourage masks in impacted areas for all individuals, vaccinated or not.

We’re also seeing new government regulations, such as the latest set of rules in New York City: Mayor Bill de Blasio announced this week that you must present proof of vaccination before entering restaurants or fitness centers.

With COVID-19 seemingly re-surging—and despite President Biden calling this a pandemic “among the unvaccinated”—the environment is rewinding for everyone. How much will the Delta variant impact the economy?

What the Fed says

Public trust in the government is currently low. Three months ago, an aggregate of polls found that 43% of Americans felt the country was on the right track. Today, that number is even lower at 38%. Pew Research has been tracking government trust since the late 1950s. Their moving average finds public trust to be pinned at 24% in a poll taken this past April.

Even though most Americans don’t trust what they say, it’s important to take note of what Federal Reserve Chairman Jerome Powell recently said at a press conference about the Delta variant and the economy: “What we’ve seen is with successive waves of COVID over the past year and some months now, there has tended to be less in the way of economic implications from each wave. We will see whether that is the case with the Delta variety, but it’s certainly not an unreasonable expectation” said Powell at a press conference.

Powell also noted that bond purchasing will begin to ease in the coming months, which has helped keep interest rates low and incentivize consumer spending.


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The real-world effects of Delta

The Delta variant is disproportionately affecting certain parts of the country. Regions with low vaccination rates are hurt the most, seeing a rise in both hospitalizations and deaths. Most of these cases are amongst unvaccinated individuals.

On the other hand, places with high vaccination rates are seeing very moderate or slight bumps in hospitalization rates and little to no bumps in death rates, according to these maps from the New York Times.

But as long as some regions of the country remain in jeopardy, consumer spending and economic action could decrease—especially when new regulations, such as New York City’s latest vaccination ruling, make it harder for businesses to operate. The National Restaurant Association issued a statement concerned with the ability of restaurants to train employees to properly handle vaccine identification.

“Checking vaccination status isn’t like ID-ing a customer before serving them a drink—staff receive training on how to do that,” said Larry Lynch, the Association’s senior vice president of science and industry. “Now, without training, our staff members are expected to check the vaccine status of every customer wanting to eat inside the establishment.”

Other concerns lie in schools and the labor market. Will all schools reopen? Or will some be subject to guidance that impairs the classroom environment? The labor market is already tight on workers and the Delta variant is likely to prolong the issue.

These factors all play into an economy that’s recovering slower than expected. Yes, real U.S. GDP growth was 6.5% for Q2, a very high growth rate, but let’s note that forecasts predicted 9.0% growth. Estimates were off by nearly 30%.

With the Delta variant moving through the country and forcing the government to tighten up again, it’s hard to predict what the true effects will be on the second half of the year.

What we do know is that previous surges in the virus left the economy relatively unscathed—besides the initial surge that shut the country down last March. Jerome Powell says the hardened economic environment is in part because industries have learned how to deal with the virus at this point.

Should real estate investors be concerned?

Yes, we should be concerned about the Delta variant. First and foremost, it’s proven to be more harmful to our health than any of the previous variations of the virus. Even with the vaccine, people are still getting sick. That alone should warrant caution.

But in terms of the economy or the real estate market turning upside down, it just doesn’t seem likely to be a real burden. As long as death rates stay low—and they have—then it’s hard to believe massive measures will be taken to prevent further spread. What I would define as a massive measure is some form of business closure, restricted travel, and any suppression of economic activity.

But, we’ll have to wait and see what happens. As always, be prepared for the worst.


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