How will Shutdown 2.0* Effect Housing?
*This of course has not happened yet… but there are definitely signs pointing to it. Hi CALIFORNIA!
Most of my blogs are about facts, with some opinion thrown in. This one is flipped and reversed. We’re going to go with mostly opinion, based on some facts.
Lately, with news of a potential partial / full shutdown of the economy in Las Vegas, we are getting asked a lot if we feel it will impact the housing market, negatively. While there is a lot we don’t know (from IF we are going to get shutdown, to how severe, to how long), there are plenty of ways to look at this. Allow me to put my 2 cents in this as this situation is every changing.
Real Estate - An Essential Business
First and foremost, when we had Shutdown 1.0 in March, Real Estate was considered an essential business, as it is tied to the financial services of our economy. So, we were still actively allowed to conduct real estate business and transactions, and we continued to do so, in a manner that was different than ever before. We, as a society, had to learn how to adapt and shift. Showings of occupied homes came with a few more strings involved, tenant occupied properties were no longer allowed to be shown, but for the most part, once we ‘figured it out’ things became somewhat normal, at least in the sense of how normal things can be. The activity level, as we all know, plummeted for about 3 weeks, from Mid March to Early/Mid April, then came roaring back. In fact, you’ve seen this chart from me dozens of times, but it is worth reposting here with new data.
The chart above takes us through the beginning of November. The orange line is this year. As you can see, we took a month and a half to full recover to 2019 levels, and we have, since August 1, remained HIGHER than we were in 2019 in terms of showing activity. So if we do have another drop off, my opinion is that we will NOT hit the lows we hit in April. We just won’t. Will we drop below where we were in 2019? There is a good chance of that. But remember, we’re also in a time, seasonally speaking, that we tend to see a decline in showing activity to begin with. So opinion 1, we will maybe see lower showing activity, but I do not believe it will be anywhere near where it was in April. If you want to see an updated view of this chart in real time, you can click here.
Mental Preparedness
We have learned so much in the last 8 months about this virus, that I believe there will be considerably less panic. We simply know how it operates and we know how to best protect ourselves. So for those reasons, I also feel that things will remain stronger this time around. Remember, activity dropped, which led to Pending Sales dropping, which led to lower sales volume. All that also, for at least one month, affected the pricing of homes.
As you may have seen in my last blog on the October Stats, our Pending Sales are at 10+ year highs for October, and same with closed sales. If we do have a slowdown, it will effect the pending and therefore the closed sales, but my guess is they will remain in what is a NORMAL November - December timeframe. Again, my opinion, but based a lot on how we’ve seen the market react previously.
Vaccine
As I write this today, we have 2 companies that have Vaccines that look like they are 90%+ effective. Two is better than one, in terms of a lot of things, but supply being the most important. If we can get 2x the amount of a vaccine into the market sooner, that will also not only give us hope, but could even further PUSH home sales even STRONGER! We have seen how the Stock Market has reacted recently, with the favorable news, and even with a slowdown/shutdown, we anticipate the good news to continue spreading in the Real Estate world.
Interest Rates
The other thing keeping things strong is Interest Rates. With rates 25% or so LOWER than they were in March, the demand for housing is still significant. We all know that rates can and do fluctuate, but there are no signs pointing to a significant increase in interest rates in the near future. Lower rates = more buying power = more offers. Sometimes the most reasonable math is the simplest math.
Conclusion
In the days ahead, we may see news coming out that sounds really bad. Not speaking about anything but REAL ESTATE in this post, please take a deep breath and realize this; we’ve been here before, 8 LONG months ago. We’ve learned a lot since March, and have continued to learn more and more. Things will operate. Deals will close. Working diligently with a professional is, as always, the best thing to do for peace of mind. If you have ANY questions, we’re just a call/text/email away!
-GZ