June 9, 2020
Monthly Market Updates
If you look at the graph below, you can see that every one of the major financial institutions that we have on the graph agree we are going to have what they call V-Type of recovery.
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.
John Burns Consulting’s Research Team
It’s worth looking back in history to place the potential impact path of COVID-19 empirically. In fact, V-shapes monopolize the empirical landscape of prior shocks, including epidemics such as SARS, the 1968 H3N2 flu, the 1958 H2N2 flu, and 1918 Spanish flu.
Harvard Business Review
Now, because of this major drop in the GDP expected in this quarter, there’s going to be a lot of recession talk. Recession does not equal a housing crisis. D
With the exception of two recessions, the Great Recession from 2007-2009, and the Gulf War recession from 1990-1991, no other recessions have impacted the U.S housing market, according to Freddie Mac Home Price Index data collected from 1975 to 2018.
Doug Brien, CEO from Mynd Property Management
Recessions normally don’t impact the housing market. As we all know, the exception (2008) was caused by the mortgage market meltdown, and not by external factors (like the situation we are in right now), and the recessions of 1980, 1981, 1991, and 2001. As you can see in the graph below, only in one recession did home prices go down (by 2%), otherwise they went up twice rather nicely.
Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But, there are distinct differences that indicate the housing market may follow a much different path. And while housing led the recession in 2008 and 2009, this time it may be poised to bring us out of it.
Mark Fleming, Chief Economist at First American
The strength of the housing market is well positioned to bring us out of it, because January and February saw more home sales in any year over the past 10 years. The housing market was strong before going into COVID-19.
What 9/11 has in common with what is happening today is that this shock has also generated fear, angst and anxiety among the general public. People avoided crowds then as they believed another terrorist attack was coming and are acting the same today to avoid getting sick. The same parts of the economy are under pressure ─ airlines, leisure, hospitality, restaurants, entertainment ─ consumer discretionary services in general.
Dave Rosenberg, Economist
When we take the same approach to the dotcom and 9/11 crash, we see a different picture than when we focus on the 2008 crash. 37% of homes are owned free and clear. 26.7% of the remaining homes have at least 50% equity. Unlike in 2008, people are not walking away from that kind of equity. In addition, 25% of someone’s income was dedicated to their home and their housing need. Today, that number is just under 15%.
When the May 8th unemployment report comes out, it is going to be ugly. But, keep in mind, going all the way back to 1989 there is no direct relationship between the unemployment rate and the number of houses sold.
First, in the early 1990s, the unemployment rate went up to 7.5%, when home sales continued to increase. In the early 2000s, the unemployment rate went up to 6%, when home sales continued to increase somewhat dramatically. If the unemployment rate reaches 15% when the numbers come out in May, we may have a different story on our hands, but we will be sure to keep you posted on where the housing market projections.
So… what’s going on in Tallahassee?
AVg SOLD LIST PRICE
AVg UNSOLD LIST PRICE
AVg SOLD PRICE
AVg DAYS ON MARKET
% SALES PRICE
TO LISTING PRICE
PERCENTAGE HOMES EXPIRED
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You’ve got questions and we can’t wait to answer them.