Ten million Americans lost their jobs over the last two weeks. The next announced unemployment rate on May 8th is expected to be in the double digits. Because the health crisis brought the economy to a screeching halt, many are feeling a personal financial crisis. James Bullard, President of the Federal Reserve Bank of St. Louis, explained that the government is trying to find ways to assist those who have lost their jobs and the companies which were forced to close (think: your neighborhood restaurant). In a recent interview he said: “This is a planned, organized partial shutdown of the U.S. economy in the second quarter. The overall goal is to keep everyone, households and businesses, whole.” That’s promising, but we’re still uncertain as to when the recently unemployed will be able to return to work. Another concern: how badly will the U.S. economy be damaged if people can’t buy homes? A new concern is whether the high number of unemployed Americans will cause the residential real estate market to crash, putting a greater strain on the economy and leading to even more job losses. The housing industry is a major piece of the overall economy in this country. Chris Herbert, Managing Director of the Joint Center for Housing Studies of Harvard University, in a post titled Responding to the Covid-19 Pandemic, addressed the toll this crisis will have on our nation, explaining: “Housing is a foundational element of every person’s well-being. And with nearly a fifth of US gross domestic product rooted in housing-related expenditures, it is also critical to the well-being of our broader economy.” How has the unemployment rate affected home sales in the past? It’s logical to think there would be a direct correlation between the unemployment rate and home sales: as the unemployment rate went up, home sales would go down, and when the unemployment rate went down, home sales would go up. However, research reviewing the last thirty years doesn’t show that direct relationship, as noted in the graph below. The blue and grey bars represent home sales, while the yellow line is the unemployment rate. Take a look at numbers 1 through 4:
The impact of the unemployment rate on home sales doesn’t seem to be as strong as we may have thought. Isn’t this time different? Yes. There is no doubt the country hasn’t seen job losses this quickly in almost one hundred years. How bad could it get? Goldman Sachs projects the unemployment rate to be 15% in the third quarter of 2020, flattening to single digits by the fourth quarter of this year, and then just over 6% percent by the fourth quarter of 2021. Not ideal for the housing industry, but manageable. How does this compare to the other financial crises? Some believe this is going to be reminiscent of The Great Depression. From the standpoint of unemployment rates alone (the only thing this article addresses), it does not compare. Here are the unemployment rates during the Great Depression, the Great Recession, and the projected rates moving forward: Bottom LineWe’ve given you the facts as we know them. The housing market will have challenges this year. However, with the help being given to those who have lost their jobs and the fact that we’re looking at a quick recovery for the economy after we address the health problem, the housing industry should be fine in the long term. Stay safe.
SOURCE KCM #Forsellers #Forbuyers #HousingMarketUpdates #SimardRealtyGroup #eXpRealty
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SOURCE KCM #ForBuyers #ForSellers #HousingMarketUpdates As our lives, our businesses, and the world we live in change day by day, we’re all left wondering how long this will last. How long will we feel the effects of the coronavirus? How deep will the impact go? The human toll may forever change families, but the economic impact will rebound with a cycle of downturn followed by economic expansion like we’ve seen play out in the U.S. economy many times over. Here’s a look at what leading experts and current research indicate about the economic impact we’ll likely see as a result of the coronavirus. It starts with a forecast of U.S. Gross Domestic Product (GDP). According to Investopedia: “Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of the country’s economic health.” When looking at GDP (the measure of our country’s economic health), a survey of three leading financial institutions shows a projected sharp decline followed by a steep rebound in the second half of this year: A recent study from John Burns Consulting also notes that past pandemics have also created V-Shaped Economic Recoveries like the ones noted above, and they had minimal impact on housing prices. This certainly gives hope and optimism for what is to come as the crisis passes. With this historical analysis in mind, many business owners are also optimistic for a bright economic return. A recent PricewaterhouseCoopers survey shows this confidence, noting 66% of surveyed business owners feel their companies will return to normal business rhythms within a month of the pandemic passing, and 90% feel they should be back to normal operation 1 to 3 months after: From expert financial institutions to business leaders across the country, we can clearly see that the anticipation of a quick return to normal once the current crisis subsides is not too far away. In essence, this won’t last forever, and we will get back to growth-mode. We’ve got this.
Bottom Line Lives and businesses are being impacted by the coronavirus, but experts do see a light at the end of the tunnel. As the economy slows down due to the health crisis, we can take guidance and advice from experts that this too will pass. SOURCE KCM #ForBuyers #ForSellers #SimardRealtyGroup #eXpRealty The last few weeks and months have caused a major health crisis throughout the world, leading to a pause in the U.S. economy as businesses and consumers work to slow the spread of the coronavirus. The rapid spread of the virus has been compared to prior pandemics and outbreaks not seen in many years. It also has consumers remembering the economic slowdown of 2008 that was caused by a housing crash. This economic slowdown, however, is very different from 2008.
One thing the experts are saying is that while we’ll see a swift decline in economic activity in the second quarter, we’ll begin a sharp rebound in the second half of this year. According to 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.” Given this situation, if you’re thinking about buying a home this year, the best thing you can do right now is use this time to get pre-approved for a mortgage, which you can do from the comfort of your home. Pre-approval will help you better understand how much you can afford so that you can confidently do the following two things when you’re ready to buy: 1. Gain a Competitive Advantage Today’s low inventory, like we’ve seen recently and will continue to see, means homebuyers need every advantage they can get to make a strong offer and close the deal. Being pre-approved shows the sellers you’re serious about buying a home, which is always a plus in your corner. 2. Accelerate the Homebuying Process Pre-approval can also speed-up the homebuying process so you can move faster when you’re ready to make an offer. Being ready to put your best foot forward when the time comes may be the leg-up you need to cross the finish line first and land the home of your dreams. Bottom Line Pre-approval is the best thing you can do right now to be in a stronger position to buy a home when you’re ready. Connect with a local real estate professional today to get the process started. SOURCE KCM #FirstTimeHomeBuyers #ForBuyers #MoveUpBuyers #SimardRealtyGroup #eXpRealty |
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