Leading financial institutions describe This Week in Real Estate the economic impact of the coronavirus as a V-shaped recovery. Past pandemics resulted in a sharp decline followed by a steep rebound with minimal impact on housing prices according to a recent study. In the face of many uncertainties what we do know as we continue to navigate this pandemic is mortgage rates the past two weeks experienced the largest two-week decline since December 2008, people are still buying and selling real estate, the government has passed the largest financial stimulus package ever and unemployment claims have hit record highs. Below are a few newsworthy events from the final days of March and first days of April that influence our business:
Looking To The Future: What The Experts Are Saying. 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 Corona virus? 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. 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. 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.
Residential Construction is Bright Spot in Jobs Report, but More Workers Start to Stay Home. While overall construction employment fell in March, according to the Bureau of Labor Statistics, residential construction added 2,000 jobs. It remains to be seen how long that will last. In its second weekly survey of residential homebuilders, conducted from March 24 to March 31, the National Association of Home Builders found 64% of respondents cited problems with the willingness of workers and subs to report to a construction site up from 42% a week earlier. “Keeping construction going is essential to our economy in so many ways. Shelter is as critical as food and water. So we need to continue building so that there’s not a shortage of housing downstream, particularly affordable housing,” said Toby Bozzuto, CEO of Bozzuto Group.
Mortgage Rates Drop on Fed Intervention. The average U.S. rate for a 30-year fixed mortgage fell to 3.33% this week, according to Freddie Mac, as the Federal Reserve’s bond-buying program created demand for securities backed by home loans. Together with the prior week’s drop, it was the largest two-week decline since December 2008. The Fed revived its bond-buying program on March 15 in an attempt to grease the wheels of the lending markets and prevent the type of credit crunch that devastated the mortgage industry more than a decade ago. This week’s 17 basis point drop in the average 30-year fixed rate indicates it’s working. “That drop reflects improvements in market liquidity and sentiment,” said Sam Khater, Freddie Mac’s chief economist. “Homebuyer demand has declined in response to current economic conditions,” Khater said. “The good news is that the pending economic stimulus is on the way and will provide support for both consumers and businesses.”