What’s the State of the RE Market? It may NOT be what you think!
Two Voices: “The economic world is coming to an End”….or “A Boiling Cauldron is simmering….just under the surface.” Who do you believe?
There’s a real polarization between people in today’s world in their responses to this virus outbreak. The “word on the street” is one based upon conjecture and feelings and opinions. It’s based upon listening to others, or cable news, or your friends/family you’re quarantined with. It is mostly one of doom and gloom and eventual collapse in the economy. The word on the other end of the spectrum is much more nuanced and based upon real trends, data points, and hard statistics. That word is coming from seasoned Economists and is actually a bit buoyant and sees a strong light at the end of the tunnel after a time of genuine struggle.
Here’s what we learned last weekend from some surveys that I found in the newspaper. Remember that in general, realtors (representing the “word on the street”) are a lot like sheep who band together, spend a lot of time bantering their opinions around water coolers and coffee makers and coming up with conclusions that are not always well-founded. Quite frankly, I’ve found over the last 18 years that they tend to follow the opinions that will allow them more excuses to stay at home and even if they are properly “sheltering at home”, they are not working there.
From the OC Register March 22, 2020: Three out of four California real estate agents responding to a realtor email poll conducted this past weekend say home sales will be negatively impacted by the coronavirus outbreak. 85% said they expect the outbreak to have a negative impact on their business and 54% said that they had clients who backed out from home purchase. Close to 60% of California Realtors believe the outbreak will harm home prices and the number of listings on the market. Nationally almost half of agents said home buying interest has decreased because of the outbreak.
On the other hand, we have Lawrence Yun one of the most respected economists in the country over the past 2 decades saying: “The decline in confidence related to the direction of the economy coupled with the unprecedented measures taken to combat the spread of COVID-19 are naturally bringing an abundance of caution among buyers and sellers” said NAR chief economist Lawrence Jun. “With fewer listings in what’s already a housing shortage environment, home prices are likely to hold steady,” he said. “The temporary softening of the real estate market would likely be followed by a strong rebound once the economic “quarantine“ is lifted and it’s critical that supply is sufficient to meet pent-up demand.“
It’s not only Mr. Yun that thinks this way, but it’s also pretty much every economist surveyed. Ben Bernanke, Christopher Thornberg, Steven Thomas and a host of others. When you have “pent up demand” releasing because of Supply and Demand issues (historic low supply of homes for sale and extremely high demand to buy because of low interest rates), you have what the economists are saying: a STRONG REBOUND will happen in the next few months. So, who do you believe? The “man on the street” or the “men behind the statistics”?