Earlier this month, realtor.com announced the release of their initial Housing Recovery Index, a weekly guide showing how the pandemic has impacted the residential real estate market. The index leverages a weighted average of four key components of the housing industry, tracking each of the following:
- Housing Demand – Growth in online search activity
- Home Price – Growth in asking prices
- Housing Supply – Growth of new listings
- Pace of Sales – Difference in time-on-market
The index then compares the current status “to the last week of January 2020 market trend, as a baseline for pre-COVID market growth. The overall index is set to 100 in this baseline period. The higher a market’s index value, the higher its recovery and vice versa.”
The graph below charts the index by showing how the real estate market started out strong in early 2020, and then dropped dramatically at the beginning of March when the pandemic paused the economy. It also shows the strength of the recovery since the beginning of May.It’s clear to see that the housing market is showing promising signs of recovery from the deep economic cuts we experienced earlier this spring. As noted by Dean Mon, Chairman of the National Association of Home Builders (NAHB):
“As the nation reopens, housing is well-positioned to lead the economy forward.”
The data today indicates the housing market is already on the way up.
Staying connected to the housing market’s performance over the coming months will be essential, as we continue to evaluate exactly how the housing market is doing in this uncharted time ahead.
In today’s economy, everyone seems to be searching for signs that a recovery is coming soon. Many experts agree that it may actually already be in motion or will be starting by the 3rd quarter of this year. With the housing market positioned to lead the way out of this recession, builder confidence might be a bright spark that gets the recovery fire started. The construction of new homes coming right around the corner is a huge part of that effort, and it may drive your opportunity to make a move this year.
According to the National Association of Home Builders (NAHB):
“New home sales jumped in May, as housing demand was supported by low interest rates, a renewed household focus on housing, and rising demand in lower-density markets. Census and HUD estimated new home sales in May at a 676,000 seasonally adjusted annual pace, a 17% gain over April.”
In addition, builder confidence is also rising, opening up opportunity for newly constructed homes in the market. The NAHB also notes:
“In a sign that housing stands poised to lead a post-pandemic economic recovery, builder confidence in the market for newly-built single-family homes jumped 21 points to 58 in June, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Any reading above 50 indicates a positive market.”
As noted above, this upward trend is supported by builders reporting an increase in demand for single-family homes in suburban neighborhoods with lower-density populations, a result of the COVID-19 health crisis.
Moreover, the most recent Monthly New Residential Construction Report from the U.S. Census indicates that authorized building permits for new residential construction increased by 14.4% month-over-month from April to May, and housing starts were also up 4.3% over the same time period. (See graph below):Although housing permits and starts are both considerably lower than they were at this time last year, indicating the new construction market is still working on building its way back up, the trends are moving in the right direction when it comes to having an impact on the U.S. economy. They’re also poised to create the much-needed new homes for Americans to purchase in a time when inventory is so scarce.
Dean Mon, Chairman of the NAHB notes:
“As the nation reopens, housing is well-positioned to lead the economy forward…Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.”
The gap between homes to buy and the high demand from purchasers may be narrowed by new construction, and the data shows that these homes are on their way into the housing market.
So, if you’ve debated whether or not to sell your house this year because you’re not sure where to move, a newly-built home – designed to your specific liking – may be your answer.
With new residential construction right around the corner, you can feel confident about selling your house and having a place to move into. Maybe it’s time to finally design the home you’ve always wanted. Let’s connect today to discuss selling your house while demand from eager buyers is high.
With more U.S. states reopening for business this summer, and as people start to return to work, we can expect the economy to begin improving. Most expert forecasts indicate this economic recovery will start to happen in the second half of this year. As we get back to work and the financial landscape of the country begins to turn around, many experts also agree that real estate has the potential to lead the way in the recovery process.
According to Ivy Zelman of Zelman & Associates:
“Housing will fare better than expected during this severe downturn.”
In addition, CNBC notes:
“Mortgage demand from home buyers shows unexpectedly strong and quick recovery…The quick recovery has surprised most forecasters.”
Robert Dietz, Chief Economist and Senior Vice President for Economics and Housing Policy of the National Association of Home Builders (NAHB) says:
“Overall, the data lend evidence to the NAHB forecast that housing will be a leading sector in an eventual economic recovery.”
One of the big reasons why housing has the potential to be such a driving force is the significant impact it has on the local economy. This impact is particularly strong when a newly constructed home is built and sold. According to a recent study by the National Association of Realtors (NAR), the average new home sale has a total economic impact of $88,416. As outlined in the graphic below, this is a combination of income generated from real estate industries, expenditures, and new home construction.With so many unknowns today, especially in the wake of a worldwide pandemic, one known factor is the bright spark the housing market can play in local and national recovery. Buying and selling a home goes well beyond personal growth and satisfaction – it supports our economy as a whole.
According to experts, the economy will begin to recover in the second half of this year. With real estate as a driver, that recovery may start sooner than we think.
There are two crises in this country right now: a health crisis that has forced everyone into their homes and a financial crisis caused by our inability to move around as we normally would. Over 20 million people in the U.S. became instantly unemployed when it was determined that the only way to defeat this horrific virus was to shut down businesses across the nation. One second a person was gainfully employed, a switch was turned, and then the room went dark on their livelihood.
The financial pain so many families are facing right now is deep.
How deep will the pain cut?
Major institutions are forecasting unemployment rates last seen during the Great Depression. Here are a few projections:
- Goldman Sachs – 15%
- Merrill Lynch – 10.6%
- Wells Fargo – 7.3%
How long will the pain last?
As horrific as those numbers are, there is some good news. The pain will be deep, but it won’t last as long as it did after previous crises. Taking the direst projection from Goldman Sachs, we can see that 15% unemployment quickly drops to 6-8% as we head into next year, continues to drop, and then returns to about 4% in 2023.
When we compare that to the length of time it took to get back to work during both the Great Recession (9 years long) and the Great Depression (12 years long), we can see how the current timetable is much more favorable.
It’s devastating to think about how the financial heartache families are going through right now is adding to the uncertainty surrounding their health as well. Hopefully, we will soon have the virus contained and then we will, slowly and safely, return to work.
Many American businesses have been put on hold as the country deals with the worst pandemic in over one hundred years. As the states are deciding on the best strategy to slowly and safely reopen, the big question is: how long will it take the economy to fully recover?
Let’s look at the possibilities. Here are the three types of recoveries that follow most economic slowdowns (the definitions are from the financial glossary at Market Business News):
- V-shaped recovery: an economic period in which the economy experiences a sharp decline. However, it is also a brief period of decline. There is a clear bottom (called a trough by economists) which does not last long. Then there is a strong recovery.
- U-shaped recovery: when the decline is more gradual, i.e., less severe. The recovery that follows starts off moderately and then picks up speed. The recovery could last 12-24 months.
- L-shaped recovery: a steep economic decline followed by a long period with no growth. When an economy is in an L-shaped recovery, getting back to where it was before the decline will take years.
What type of recovery will we see this time?
No one can answer this question with one hundred percent certainty. However, most top financial services firms are calling for a V-shaped recovery. Goldman Sachs, Morgan Stanley, Wells Fargo Securities, and JP Morgan have all recently come out with projections that call for GDP to take a deep dive in the first half of the year but have a strong comeback in the second half.
Is there any research on recovery following a pandemic?
There have been two extensive studies done that look at how an economy has recovered from a pandemic in the past. Here are the conclusions they reached:
1. John Burns Consulting:
“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices), and some very cutting-edge search engine analysis by our Information Management team showed the current slowdown is playing out similarly thus far.”
2. Harvard Business Review:
“It’s worth looking back at history to place the potential impact path of Covid-19 empirically. In fact, V-shapes monopolize the empirical landscape of prior shocks, including epidemics such as SARS, the 1968 H3N2 (“Hong Kong”) flu, 1958 H2N2 (“Asian”) flu, and 1918 Spanish flu.”
The research says we should experience a V-shaped recovery.
Does everyone agree it will be a ‘V’?
No. Some are concerned that, even when businesses are fully operational, the American public may be reluctant to jump right back in.
As Market Business News explains:
“In a typical V-shaped recovery, there is a huge shift in economic activity after the downturn and the trough. Growing consumer demand and spending drive the massive shift in economic activity.”
If consumer demand and spending do not come back as quickly as most expect it will, we may be heading for a U-shaped recovery.
In a message last Thursday, Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, agrees with other analysts who are expecting a resurgence in the economy later this year:
“We’re forecasting real economic growth of 30% for the U.S. in the 4th quarter of this year and 6.1% in 2021.”
His projection, however, calls for a U-shaped recovery based on concerns that consumers may not rush back in:
“After the steep plunge and bottoming out, a ‘U-shaped’ recovery should begin as consumer confidence slowly returns.”
The research indicates the recovery will be V-shaped, and most analysts agree. However, no one knows for sure how quickly Americans will get back to “normal” life. We will have to wait and see as the situation unfolds.
In a recent survey by realtor.com, people thinking about selling their homes indicated they’re generally willing to allow their agent and some potential buyers inside if done under the right conditions. They’re less comfortable, however, hosting an open house. This is understandable, given the health concerns associated with social contact these days. The question is, if you need to sell your house now, what virtual practices should you use to make sure you, your family, and potential buyers stay safe in the process?
In today’s rapidly changing market, it’s more important than ever to make sure you have a digital game plan and an effective online marketing strategy when selling your house. One of the ways your agent can help with this is to make sure your listing photos and virtual tours stand out from the crowd, truly giving buyers a detailed and thorough view of your home.
So, if you’re ready to move forward, virtual practices may help you win big when you’re ready to sell. While abiding by state and local regulations is a top priority, a real estate agent can help make your sale happen. Agents know exactly what today’s buyers need, and how to put the necessary digital steps in place. For example, according to the same survey, when asked to select what technology would be most helpful when deciding on a new home, here’s what today’s homebuyers said, in order of preference:
- Virtual tour of the home
- Accurate and detailed listing information
- Detailed neighborhood information
- High-quality listing photos
- Agent-led video chat
After leveraging technology, if you have serious buyers who still want to see your house in person, keep in mind that according to the National Association of Realtors (NAR), there are ways to proceed safely. Here are a few of the guidelines, understanding that the top priority should always be to obey state and local restrictions first:
- Limit in-person activity
- Require guests to wash their hands or use an alcohol-based sanitizer
- Remove shoes or cover with booties
- Follow CDC guidance on social distancing and wearing face coverings
Getting comfortable with your agent – a true trusted advisor – taking these steps under the new safety standards might be your best plan. This is especially important if you’re in a position where you need to sell your house sooner rather than later.
Nate Johnson, CMO at realtor.com ® notes:
“As real estate agents and consumers seek out ways to safely complete these transactions, we believe that technology will become an even more imperative part of how we search for, buy and sell homes moving forward.”
It sounds like some of these new practices might be here to stay.
In a new era of life, things are shifting quickly, and virtual strategies for sellers may be a great option. Opening your doors up to digital approaches may be game-changing when it comes to selling your house. Let’s connect so you have a trusted real estate professional to help you safely and effectively navigate through all that’s new when it comes to making your next move.
Earlier this week, we discussed how most projections from financial institutions are calling for a quick V-shaped recovery from this economic downturn, and there’s research on previous post-pandemic recoveries to support that expectation.
In addition, we noted how there are some in the business community who believe we may instead be headed for a U-shaped recovery, where the return to previous levels of economic success won’t occur until the middle of next year. Yesterday, Reuters released a poll of U.S. and European economists which revealed that most surveyed are now leaning more toward a U-shaped recovery.
Why the disparity in thinking among different groups of economic experts?
The current situation makes it extremely difficult to project the future of the economy. Analysts normally look at economic data and compare it to previous slowdowns to create their projections. This situation, however, is anything but normal.
Today, analysts must incorporate data from three different sciences into their recovery equation:
1. Business Science – How has the economy rebounded from similar slowdowns in the past?
2. Health Science – When will COVID-19 be under control? Will there be another flareup of the virus this fall?
3. Social Science – After businesses are fully operational, how long will it take American consumers to return to normal consumption patterns? (Ex: going to the movies, attending a sporting event, or flying).
The challenge of accurately combining the three sciences into a single projection has created uncertainty, and it has led to a wide range of opinions on the timing of the recovery.
Right now, the vast majority of economists and analysts believe a full recovery will take anywhere from 6-18 months. No one truly knows the exact timetable, but it will be coming.
With the release of the latest Economic Pulse Flash Survey from the National Association of Realtors (NAR), results show that people selling their houses today are holding strong on price. According to the most recent data, 74% of real estate agents noted that sellers are not dropping listing prices to attract more buyers.
Lawrence Yun, Chief Economist at NAR, noted:
“The housing market faced an inventory shortage before the pandemic. Given that there are even fewer new listings during the pandemic, home sellers are taking a calm approach and appear unwilling to lower prices to attract buyers during the temporary disruptions to the economy.”
This inventory shortage, which spread widely throughout the housing market going into today’s economic slowdown, created an environment where there were not enough homes for sale for those who wanted to buy them. With that backdrop setting the stage, Yun also notes:
“With the current quarantine recommendations in place, fewer sellers are listing homes, which will limit buyer choices.”
So, with buyer choices already limited going into this season, and more sellers removing listings today, if you’ve been thinking about listing your house, it’s a great time to do so. Many others in your neighborhood may be waiting to make a move or removing their listings, so staying on the market – or jumping into it – could work to your advantage.
Buyers today are serious ones, and with prices holding steady in this low-inventory market, you can feel confident about selling today. Embracing the process virtually, where available, could help your house hit the top of an eager buyer’s list. While your neighbors miss out on this opportunistic time, you don’t have to.
If buyer choices are limited in your neighborhood, selling now may help your listing rise to the top of the pool. Let’s connect today to make sure you have the expert help you need to succeed in the selling process.
Through all the volatility in the economy right now, some have put their search for a home on hold, yet others have not. According to ShowingTime, the real estate industry’s leading showing management technology provider, buyers have started to reappear over the last several weeks. In the latest report, they revealed:
“The March ShowingTime Showing Index® recorded the first nationwide drop in showing traffic in eight months as communities responded to COVID-19. Early April data show signs of an upswing, however.”
Why would people be setting appointments to look at prospective homes when the process of purchasing a home has become more difficult with shelter-in-place orders throughout the country?
Here are three reasons for this uptick in activity:
1. Some people need to move. Whether because of a death in the family, a new birth, divorce, financial hardship, or a job transfer, some families need to make a move as quickly as possible.
2. Real estate agents across the country have become very innovative, utilizing technology that allows purchasers to virtually:
- View homes
- Meet with mortgage professionals
- Consult with their agent throughout the process
All of this can happen within the required safety protocols, so real estate professionals are continuing to help families make important moves.
3. Buyers understand that mortgage rates are a key component when determining their monthly mortgage payments. Mortgage interest rates are very close to all-time lows and afford today’s purchaser the opportunity to save tens of thousands of dollars over the lifetime of the loan.
Many families have decided not to postpone their plans to purchase a home, even in these difficult times. If you need to make a move, let’s connect today so you have a trusted advisor to safely and professionally guide you through the process.
With businesses starting to slowly open back up again in some parts of the country, it’s important to understand how housing can have a major impact on the recovery of the U.S. economy. As we’ve mentioned before, buying a home is a driving financial force in this process. Today, many analysts believe one of the first things we’ll be able to safely bring back is the home building sector, creating more jobs and impacting local neighborhoods in a big way. According to Robert Dietz in The Eye on Housing:
“The pace of new home sales will post significant declines during the second quarter due to the impacts of higher unemployment and shutdown effects of much of the U.S. economy, including elements of the real estate sector in certain markets. However, given the momentum housing construction held at the start of 2020, the housing industry will help lead the economy in the eventual recovery.”
The National Association of Home Builders (NAHB) notes the impact new construction can have on the job market:
“Building 1,000 average single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees for all levels of government to support police, firefighters and schools, according to NAHB’s National Impact of Home Building and Remodeling report.”
These employment opportunities, along with the home purchase, drive the economy in a major way. The National Association of Realtors (NAR) recently shared a report that notes the full economic impact of home sales. This report summarizes:
“The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance.”
Here’s the breakdown of how the average home sale boosts the economy:As noted above in the circle on the right, the impact is almost double when you purchase new construction, given the sheer number of workers it requires to design, build, equip, and finalize the sale of the home. The NAHB paints a clear picture of these roles:
“The NAHB model shows that job creation through housing is broad-based. Building new homes and apartments generates jobs in industries that produce lumber, concrete, lighting fixtures, heating equipment and other products that go into a home remodeling project. Other jobs are generated in the process of transporting, storing and selling these products.
Additional jobs are generated for professionals such as architects, engineers, real estate agents, lawyers and accountants who provide services to home builders, home buyers and remodelers.”
The same NAR report also breaks down the average economic impact by state:On an emotional level, what’s most important for today’s consumers to feel confident about is the safety component that goes into the process. Mitigating the risk of essential personnel at this moment in time is more crucial than ever as we all aim to reduce the spread of the coronavirus. Fortunately, the NAHB has put immense effort into a plan that prioritizes the health and safety of home builders and contractors:
“This is why NAHB and construction industry partners have developed a Coronavirus Preparedness and Response Plan specifically tailored to construction job sites. The plan is customizable and covers areas that include manager and worker responsibilities, job site protective measures, cleaning and disinfecting, responding to exposure incidents, and OSHA record-keeping requirements.”
Buying a home is a substantial economic driver today, and when new construction picks back up again, it will be an even stronger recovery force throughout the country. If you’re in a position to buy a home this year, you can have a significant impact on your local neighborhoods and safely make the move you’ve been waiting for. It’s a win-win.