This seems to be the question of the day whether you are watching the news, are on social media, or sitting on your zillionth zoom meeting chatting with folks. So I decided to tackle it in my weekly Monday Market update and dispel some things you may very well be hearing about it.
If you prefer to watch it rather than to read it ( I can’t blame you at all) click here.
Please note that the data is from a market insight presentation made by a prestigious real estate marketing company called Keeping Current Matters.
So, in looking at the question: when is the economy going to recover?
The word on the street and what many reporters are inaccurately quoting in their stories and opinions is that many economists – 45 from Reuters to be exact – are calling for a “U” shaped recovery.
However, when you look at the real investor dictionary definition of what a “U” shaped recovery is, it states: “This type of recovery involves the slow decline followed by a slow incline back to its previous climax.”
Let’s be clear: our economy did not experience a slow decline. It was anything but that. It was a cold, hard stop and drop.
So when trying to figure out what kind of recovery we will have, it’s best to look at three factors and the experts.
1. Business Science – how has the economy rebounded from similar slowdowns in the past?
2. Health Science – When will Covid-19 be under control? Will there be another flareup of the virus this fall?
3. Social Science – After businesses are fully operational, how long will it take American consumers to return to normal consumption patterns? Ex. going to movies, concerts and sports events, flying.
Remember: who you work with matters. Who you listen to matters. And who you are influenced by matters.
Listening and getting your information is only as good as the source you get it from which is why it is imperative to get it from the source who knows. Really knows. And who knows better than major financial institutions rather than 45 random economists who we don’t know their qualifications much less their notoriety.
So when looking at those who are seriously in the know, the 4 major financial institutions (Goldman Sachs, JP Morgan, Morgan Stanley, Wells Fargo) in the United States, they are calling for a “V” shaped recovery.
In addition, according to Harvard Business Review, it’s worth looking back at 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 (“Hong Kong”) flue, 1958 H2N2 (“Asian”) flue, and the 1918 Spanish flu.
Furthermore, analysis has shown us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices), and some showed the current slowdown is playing out similarly thus far.
Per John Normand who is Head of Cross Asset Fundamental Strategy at J.P. Morgan, the Covid-19 recession might be only one or two months old, but a few signs of the always hoped for V-shaped recovery are starting to emerge.
Signs of this are being seen from Zillow as traffic has picked up since March 22, outpacing or remaining just a few percentage points behind 2019 levels through early April. And Showtime which is a real estate platform to book viewings of homes on the market are picking up.
Last, of all, Zillow is reporting that pending sales are picking up. Pending sales turned positive in the week ending April 15, and is up 6.2% week over week as of the seven days ending April 19.
This news is corroborated in Berkeley’s real estate market for the last few weeks.
Berkeley’s real estate market has been holding steadily. It hasn’t really moved drastically in any direction which I find promising because it goes back to one of the great reasons why living in Berkeley is beneficial – its usually the last to lose value, and the first to regain value as per my video (click here). Now while the value hasn’t dropped, we have seen the inventory tighten significantly. However, when I talk to my peers in the industry (mortgage lenders, Realtors, stagers, construction) I am hearing of Seller’s holding off until they feel good about putting their homes on the market as we as realtors are learning to pivot and alleviate their concerns for health and safety.
The proof is in the pudding.
Berkeley, California numbers for the past 5 weeks.
April 20-26, 2020
April 13-19, 2020
April 6-12, 2020
March 30-April 5, 2020
March 23-29, 2020