Market Perspective: Take a Closer Look

Over the past several weeks, I’ve been speaking with lots of clients and customers and I can tell you that there’s a lot of anxiety right now regarding the coronavirus pandemic.  Folks are rightfully concerned about the health situation, and many are concerned about the impact on the economy as well. 

Amidst all this anxiety, anyone with a megaphone – from the mainstream media to a lone blogger – has realized that bad news headlines sell. Unfortunately, we will continue to see a rash of horrifying headlines over the next few months.

In this article, I want to make sure folks who may be in the market to buy or sell a home aren’t paralyzed by the headlines before getting the full story. When it comes to the health issue, you should look to the Centers for Disease Control and Prevention (CDC) or the World Health Organization (WHO) for the most reliable information. Finding reliable resources on the economic impact of the virus is more difficult. For this reason, I wanted to highlight two recent headlines and try to take a closer look at the situation. 

Headline #1:Goldman Sachs Forecasts the Largest Drop in GDP in Almost 100 Years”

It sounds like Armageddon. Though the headline is true, it doesn’t reflect the full essence of the Goldman Sachs forecast. The projection is actually that we’ll have a tough first half of the year, but the economy will bounce back nicely in the second half; GDP will be up 12% in the third quarter and up another 10% in the fourth (see chart below). This aligns with research from John Burns Consulting involving pandemics, the economy, and home values. They concluded:

“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.” 

The economy will suffer for the next few months, but then it will recover. 
Headline #2: “Fed President Predicts 30% Unemployment!”

That headline was attributed to James Bullard, President of the Federal Reserve Bank of St. Louis. What Bullard actually said was it “could” reach 30%. But let’s look at what else he said in the same Bloomberg News interview:

“This is a planned, organized partial shutdown of the U.S. economy in the second quarter,” Bullard said. “The overall goal is to keep everyone, households and businesses, whole” with government support. According to Bloomberg, he also went on to say: “I would see the third quarter as a transitional quarter” with the fourth quarter and first quarter next year as “quite robust” as Americans make up for lost spending. “Those quarters might be boom quarters,” he said.

Again, Bullard agrees we will have a tough first-half and rebound quickly.

Bottom Line

There’s a lot of misinformation out there. If you want the best advice on what’s happening in the current housing market, contact your local real estate agent.