These terms are significant as it reminds us that this is not a regular downturn. Using terms like recession and depression really do not capture the contours of what is happening here and nor am I qualified to discuss these complex economic issues. However, I can comment on housing.
Homebound economic pundits for every business sector have been trying to make sense of what the immediate future holds for us. The problem with it all is it depends on uncertainties that we cannot control any more than our indifferent Spring weather that is not making our home-bound life any easier.
Economic theorists will be studying the situation we are in for some time. This novel corona virushas also created a novel economic calamity. It bears no resemblance to anything that has happened before in modern times. During the Great 1918 Flu Pandemic we did not have a service-based economy and an inter-connected world. The term Covid Economy has thus been coined by economic commentators to describe this new state of affairs.
That said I have seen a pretty broad theme here suggesting that as long as things do not go entirely to hell, housing and specifically homeowners, may emerge as the least affected part of the economy.
Robert Dietz in The Eye on Housing is upbeat based on the strong national state of new construction going into this crisis and the fact that in the near term we are not going to see an over-supply of inventory so price stability should be expected.
Ivy Zelman, President, Zelman & Associates broadly concurs as seeing some slowing of price appreciation but on overall positive rate, based on favorable lending conditions and low inventories.
Freddie Mac is officially singing the same tune. Basically there has been a big undersupply of housing in the US and this, combined with the large stimulus provided, will allow price growth to get up to 2-3% by the end of the year – nationally.
Mark Fleming, Chief Economist, First American, also notes the historically low levels of housing supply. Growth may slow but he thinks it will not go negative.
So that is the general theme I see in the industry commentators. Now if you want to see a counter to this more measured optimism you can always take a listen to Dr Doom, Nouriel Roubini, the economist that predicted the last downturn. I can spare you the anguish of listening to that podcast. The great Sonny Landham has condensed it to 17 seconds – (just kidding…)
Warren Buffet is more cautiously optimistic and he is still prepared to bet on America. He knows we are not going back to normal and has exited Airlines and probably was not holding Cruise Ship stocks!
Please keep in mind that there is no such thing as a national housing market – it is very supply and demand driven locally. The Chicagoland market is not overvalued and at some point the demand will have to catch up. The current stay-at-home order will motivate more people to invest in real estate as the appreciation of having a home will be greater for people who just want to enjoy their surroundings more vs being couped up in their smaller/tighter abodes.
In the end, we will still need houses and housing. It is too early to say much from my end but I am seeing more buyer activity in the last 2 weeks since the beginning of this pandemic. I am hoping we can all stick together a bit more as we cautiously brave this new reality and get back to some sort of socially more distanced new reality. I am betting that we will be having a baby boom in 9 months time – so that definitely will help the housing market!
Stay safe and healthy my friends. Feel free to call, email, text, zoom, facetime, whatsapp, wechat – anytime!