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Confused About the Economic Recovery? Here’s Why.
As we continue to work through the health crisis that plagues this country, more and more conversations are turning to economic recovery. While we look for signs that we’ve reached a plateau in cases of COVID-19, the concern and fear of what will happen as businesses open up again is on all of our minds. This causes confusion about what an economic recovery will look like. With this in mind, it’s important to understand how economists are using three types of sciences to formulate their forecasts and to work toward clearer answers.
- Business Science – How has the economy rebounded from similar slowdowns in the past?
- Health Science – When will COVID-19 be under control? Will there be another flareup of the virus this fall?
- People 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).
Sam Khater, Chief Economist at Freddie Mac, says:
“Although the uncertainty of the crisis means forecasts of economic activity are more unclear than usual, we expect that most of the economic damage from the virus will be contained to the first half of the year. Going forward, we should see a recovery starting in the second half of 2020.”
This past week, the Bureau of Economic Analysis released the advanced estimate for Gross Domestic Product (GDP) for the first quarter of 2020. That estimate came in at -4.8%. It was a clear indicator showing how the U.S. economy slowed as businesses shut down and consumers retreated to their homes in fear of the health crisis and of contracting COVID-19.
Experts agree that the second quarter of 2020 will be an even greater slowdown, a sign more businesses are feeling the effects of this health crisis. The same experts, however, project businesses will rebound, and a recovery will start to happen in the second half of this year.
Bottom Line
As time goes on, we’ll have more clarity around what the true economic recovery will look like, and we’ll have more information on the sciences that will affect it. As the nation’s economy comes back to life and businesses embrace new waves of innovation to serve their customers, the American spirit of grit, growth, and prosperity will be alive and well.
How to Test-Drive a Neighborhood While Sheltering in Place [INFOGRAPHIC]
![How to Test-Drive a Neighborhood While Sheltering in Place [INFOGRAPHIC] | MyKCM](https://desireestanley.com/files/2020/05/20200501-MEM-1046x775.jpg)
![How to Test-Drive a Neighborhood While Sheltering in Place [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2020/04/30083703/20200501-MEM-1046x775.jpg)
Some Highlights
- Staying at home doesn’t mean your search for a new place needs to come to a standstill.
- Check out these tips on how to explore other neighborhoods virtually in the homebuying process. You may find a spot that better suits your needs without ever leaving your living room!
- Let’s connect today so you have help with all of the additional steps along the way, and you’re ready to make your next move.
Why the Housing Market Is a Powerful Economic Driver
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.”
Bottom Line
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.
Buying a Home Right Now: Easy? No. Smart? Yes.
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.
Looking closely at the third reason, we can see that there’s a big difference between purchasing a house last December and purchasing one now (see chart below):
Bottom Line
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.
Rise to the Top of the Pool by Selling Your House Today
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.
Bottom Line
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.
Keys to Selling Your House Virtually
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.
Bottom Line
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.
10 Deadly Mistakes Buyers Make When Purchasing a Home
10 deadly mistakes buyers make when purchasing a home
10 deadly mistakes buyers make when purchasing a home
Today’s Homebuyers Want Lower Prices. Sellers Disagree.
The uncertainty the world faces today due to the COVID-19 pandemic is causing so many things to change. The way we interact, the way we do business, even the way we buy and sell real estate is changing. This is a moment in time that’s even sparking some buyers to search for a better deal on a home. Sellers, however, aren’t offering a discount these days; they’re holding steady on price.
According to the most recent NAR Flash Survey (a survey of real estate agents from across the country), agents were asked the following two questions:
1. “Have any of your sellers recently reduced their price to attract buyers?”
Their answer: 72% said their sellers have not lowered prices to attract buyers during this health crisis.
2. “Are home buyers expecting lower prices now?”
Their answer: 63% of agents said their buyers were looking for a price reduction of at least 5%.
What We Do Know
In today’s market, with everything changing and ongoing questions around when the economy will bounce back, it’s interesting to note that some buyers see this time as an opportunity to win big in the housing market. On the other hand, sellers are much more confident that they will not need to reduce their prices in order to sell their homes. Clearly, there are two different perspectives at play.
Bottom Line
If you’re a buyer in today’s market, you might not see many sellers lowering their prices. If you’re a seller and don’t want to lower your price, you’re not alone. If you have questions on how to price your home, let’s connect today to discuss your real estate needs and next steps.
Why Home Office Space Is More Desirable Than Ever
For years, we’ve all heard about the most desirable home features buyers are looking for, from upgraded kitchens to remodeled bathrooms, master suites, and more. The latest on the hotlist, however, might surprise you: home offices.
In a recent article by George Ratiu, Senior Economist with realtor.com, he notes how listings with an office are selling quickly:
“As more companies have been embracing remote work, buyers are driving demand for houses with home offices higher. Homes featuring the term ‘office’ are selling 9 days faster than the overall housing inventory.”
Today, more and more people are working remotely, and that’s not just because the current pandemic is prompting businesses to operate virtually. According to the same piece and the most recent data available, the number of employees working at home was fairly steady from 1997 – 2004 but has been climbing ever since (see graph below):
Clearly, the work-from-home population is growing, and technology is making it possible. Just last month, according to an article on Think Google, searches for telecommuting hit an all-time high, and that’s certainly no surprise given our current situation.
People all over the U.S. are looking for answers on how to be most effective at home, and it’s making the ideal workspace more and more desirable. In fact, best practices from seasoned work-from-home professionals, like Chris Anderson, Senior Account Executive at HousingWire, tout that having a dedicated space is a must for productivity.
With today’s increasing demand for home offices, it’s a great feature to highlight within your listing if you’re selling a house that may meet this growing need. From bright natural light with large windows to built-in bookshelves or a quiet and secluded atmosphere, whatever makes your office space shine is worth mentioning to buyers when you’re ready to list your house.
Ratiu concludes:
“For housing, the continued increase in the share of remote workers implies that demand for homes with offices or dedicated work spaces will continue to increase. The current coronavirus pandemic offers a dramatic indication of the fact that companies and employees will have to develop plans and clearer policies for remote work beyond the current crisis.”
Bottom Line
Remote work may become more widely accepted as this current crisis teaches businesses throughout the country what it takes to function virtually. So, what seems like a business challenge today may be more of the norm tomorrow. With that in mind, if you have a home office, your house may be more desirable to buyers than you think.
Will Surging Unemployment Crush Home Sales?
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 unemployment rate was rising between 1992-1993, yet home sales increased.
- The unemployment rate was rising between 2001-2003, and home sales increased.
- The unemployment rate was rising between 2007-2010, and home sales significantly decreased.
- The unemployment rate was falling continuously between 2015-2019, and home sales remained relatively flat.
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 Line
We’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.
