Hi! Charlotte here with your market insights as we head into September 2020. the last month of the third quarter. The Wall Street Journal says, “A strong economic recovery depends on effective and sustained containment of COVID-19,”. With 91% of business and academic economists agreeing somewhat or strongly that economic recovery depends on containing the pandemic.
So, where we know we are … here … wrapping up August, … as we look to economic recovery … it is starting to happen.
Now what actually happened is the economy constricted initially 32.9%. So, very, very close to what experts said would happen in the second quarter. And, if we’re going to look at what those experts said then, we have to look at what they’re saying right now. And I think it’s encouraging relative to economic recovery. And those same analysts just forecasted anywhere from 15 to 25% economic recovery over the last quarter of the second quarter as we go forward.
I think this is an interesting perspective from Morgan Stanley’s Chief Investment Officer, Lisa Shallet who says: “Indeed the worst ever GDP leading could be followed by the best ever growth in the third quarter.” as we look at general economic numbers we should look forward to seeing some significant improvement going forward.
Now, this leads to if we look at the overall economy, what’s happening in the housing market. How are we recovering there? Hear from several economists from across the spectrum and what they’re saying. It almost reads like a movie trailer. You see realtor.com saying an “astonishing rebound”. “Shockingly strong” from HousingWire. ATTOM Data Solutions says, “pulled something of a high wire act in the second quarter”. And Zillow says, “stared the pandemic right in the eye and hasn’t blinked. It’s been nothing short of remarkable.” All of these things that are descriptors of housing market recovery.
And the reason this is so interesting is this is not the way that economists normally speak. They speak very factually, very much based on the data, and they’re using words like “shockingly strong”, hasn’t blinked in the eye of the storm, I think really summing up that where the housing market is right now is blowing away what experts have thought, and really underscoring the strength of housing right now, and the importance of housing.
So, we’re seeing housing play a critical role. You may recall when I spoke of the impact that one home has on the national economy but more importantly on our local economies and just that effect of housing and economic recovery. But if we want to really look at what’s going on we have to start to look at behavior, since about the middle of May we’ve seen weekly showings be up. People’s reasons for looking for a home have changed or have grown, or become greater during this time.
And as we go into the fall I think we’re going to start to see that normalize out a little bit. But the showings and the activity out in the market is very, very strong.
Coming from Ivy Zelman, Zelman & Associates, housing research firm, she says this: “Whether in terms of pending contract activity or our proprietary buyer demand ratings, the various measures of demand captured in this month’s survey can only be described as shockingly strong in spite of the resurgence of COVID-19 cases.”
Image___We’ve looked very often at the NAR housing market recovery index. And this index really takes four things, demand, supply, price, and time on market, combines those together and creates this index. We’re not ahead of where we would have been had we not gone through the pandemic, but that index is now reading above where we were in February.
The question that starts to come up and is on a lot of people’s minds is, what’s going to happen to prices? What is going on with prices? Many have talked about experts and have said, “hey we may see price deprecation during this time”. Quicken Loans came out and said this: “The pandemic has not stopped the consistent home price growth we have witnessed in recent years.” I think this is—image—indicative of the recovery and coming through that. We’ve seen housing literally become more important through this pandemic. People’s needs become more important in really driving that demand. Now there’s a large range of projections on what’s happening with housing prices. Seven out of nine experts are calling for positive appreciation going into the next 12 months. See the chart.——image—
Now I want to go back to CoreLogic who said “Last month’s forecast of a 6.6% home price decline through May 2021 has been revised as projected unemployment rates through 2020 showed improvement. The recent rebound of home sales suggests the pandemic did not derail home buyers.” If anything I would interject there it’s made home more important.
So, again, that’s been a massive correction they’ve made to their forecast. But again, the story right now across the country is that as we look at listings, they’re lower in number than they’ve been even though we continue to bring listings to market.
Now this is the picture of a store that can’t keep the shelves stocked fast enough before people come and purchase the products from them. We can’t bring homes to market as fast as people are coming in and buying them. And I think right now as we look at this, this is a story that we’re seeing across the country. Because I look at our information weekly, last week showed an addition of over 200 homes to the market followed by a record week of properties going into escrow and also properties closing escrow which tallies up to under 600 homes available which is more than half less as there were at this time last year.
The other side of demand is to look at purchase applications. And what we can see right now is we’ve been through 11 straight weeks of year over year increase, meaning applications are higher this year than last year. As we look in the rearview mirror and we head into the fall, we have a lot of people that are looking and ultimately going into contract to buy a home. Many of those in multiple offer scenarios, meaning somebody else didn’t get the house so they’re still looking.
Demand is being driven by what I would call hot interest rates. People are saying, “now is the time to do what we’re going to do.” ” We can maybe afford more home, we can afford the home that we want now.” ” The payment’s at a price that we can afford.” Or they’re just simply saying “hey, we were thinking about doing it in the next couple of years, due to the interest rate environment, we’re going to go ahead and make that move and make that decision because it makes more sense because we don’t know where that interest rate is going to go.”
Interest rates, as we look at forecasts, are forecasted and projected to remain low, but as the economy improves we know that those will start to edge up. The gift of the economic downturn is oftentimes lower interest rates, and we’re seeing that right now. But as the economy improves we should expect those interest rates to go up.
Now the other side of that is why are people moving today? What is causing them to make those decisions? I want to bring some interesting information into this
conversation because I think there are specific things happening right now that are causing people to say, “we want to do something.” A big driver of this right now is the plan to buy a home due to the possibility of remote work. Two out of three of the buyers surveyed in this case said they are planning to buy a home that fits their needs for remote work. Now I don’t know if that means that two out of three are going to be working from home but it definitely means two out of three are saying I have that need. I may be going back to work but if this happens again I want a place to work from. And this need to have a home that I can work from, that I cannot be on top of one another in doing whatever I need to do, or just having the facilities and the access to a place that’s quiet that I can work from is extremely important today to people and driving a lot of these decisions that people are making to go out and buy a home.
This perspective from John Burns’ Consulting says, “As states, cities, and counties around the country slowly reopen, we predict the great American move. For safety reasons, financial prospects, life change improvements, personal comfort, and employment. We expect a surge in household and business relocations over the next few months that will provide new strategic opportunities for the real estate market.” they’re a consulting firm that works with a lot of publicly traded builders, hedge funds, making these kind of large decisions relative to their business. They’re calling for the great American move, based on: The ability to work from home, financial reasons, life change, people just saying we’re making different decisions today, and it’s certainly being manifest that way.
I want to bring in one other piece of information from ATTOM Data Solutions that’s important right now. And this is coming out of the second quarter. It says, “Home sellers nationwide realized a gain of $75,971 on a typical sale.”
That’s up from the $66,500 in the first quarter of 2020, and $65,250 in the second quarter of last year. The latest figure, based on medium purchase and resale price, has marked yet another peak level of raw profits in the United States since the housing market began recovering from the Great Recession.—-image—
Call, text if you would like specifics for your situation of preparing to move to your next destination before the end of the fourth quarter… can you believe we are saying that?? Fourth-quarter!!
And I look forward to seeing you next time.
Charlotte