Well, we are now in our 128th month of the longest economic expansion in U.S. history dating back to 1856, since the economic collapse in 2008.
So everything should be fantastic, right?
Well not really, because between the coronavirus, the craziness with the stock market and the uncertainty of the U.S. and the global economy, it’s anyone’s guess as to where this is all going.
However, Jerome Powell just cut interest rates from 1.75-1.25 percent (50 basis points), to bolster our economy over the worrisome effects now and in the future from the coronavirus. This is the first time this emergency action by the Federal Reserve has occurred since the 2008 crisis.
One of the main reasons was tourism and the travel slowdown, with so many canceled flights by all the major airlines that are being severely affected by the coronavirus (Covid-19).
As the virus spreads from country to country this is when it will be called a pandemic and we may be heading in that direction any day, as new cases are occurring on a daily basis in greater numbers outside of China.
The shortage of coronavirus detection kits is another problem, whereby there is a lack of testing on those that may have the virus that when sneezing could infect others around them as well as what they may touch.
There was an article in The Washington Post by Kathy Orton on Jan. 6 that was extremely informative in depicting and predicting how the real estate market will perform in 2020. Our National Association of Realtor’s senior economic advisor, Lawrence Yun, had some pertinent thoughts on our market and where it would be heading this year and I quote from the article:
“The National Association of Realtors trade association for real estate agents predicts moderate growth in the housing market and continued low mortgage rates,” he said.
“New-home sales are expected to rise to 750,000, an 11 percent increase that puts them at a 13-year high. Existing-home sales will continue to be held down by lack of supply, rising modestly to 5.6 million, a 4 percent increase.
“The national median sale price of an existing home is expected to grow to $270,400, an increase of 4.3 percent from 2019,” he said. “In 2020, more home-building activity and consequent growth in supply should tame down-home price gains. That’s a healthy development for potential home buyers. Southern cities should once again do better than most other markets.”
The NAR expects 10 markets to have home price appreciation that outpaces the rest of the country over the next three to five years: Ogden, Utah; Las Vegas; Fort Collins, Colo.; Colorado Springs; Dallas/Fort Worth; Columbus, Ohio; Raleigh/Durham/Chapel Hill, N.C.; Charlotte; Charleston, S.C.; and Tampa/St. Petersburg, Fla.
The 30-year fixed-mortgage rate will remain below 4 percent in the coming year, moving to 3.8 percent by the end of 2020.
“Interest rates will remain low, as long as we have government backing of mortgage-backed securities,” Yun said. “But mortgage rates may increase as inflation kicks in and economic activity markedly picks up.”
Here is the link if you want to read the entire article:
https://www.washingtonpost.com/business/2020/01/06/experts-predict-what-housing-market-will-bring/#comments-wrapperCorona Virus and its future impact on the economic markets globally
Real Estate has been the major mover of our economy with all that is involved in the purchasing process of refrigerators, stoves, microwaves, etc. and everything else that you can think of that one buys for their investment properties, homes, townhomes, condos, coops, rentals.
As the supply chain is reduced and is cut-off from China and other affected countries and as our current available inventory is eliminated and is reduced to a potential standstill, this is when layoffs could and will occur.
The antidote and solution to our problem is the vaccine that I am quite sure all the available manpower and scientists are feverishly working on and hopefully will be out within 6 months or maybe not! Everyone needs to be vigilant in their everyday goings about and also realize those paper masks that everyone is purchasing will absolutely not prevent you from contracting the virus.
I am not a doctor, so I can only provide information and not medical advice.
However, if you are nervous about this whole situation and seriously concerned and want the proper protection, you can research an OSHA approved NIOSH-Approved N95 Respirator and read up on their efficacy against the Coronavirus.
The bottom line is that the ripple effect of the coronavirus on our real estate, even though interest rates were lowered today, and at the same time inventory is at a 30 year low, unemployment at 50-year lows and interest rates at 50-year lows well below historical norms, may not change anything due to the lack of housing inventory.
We need an average of one million homes produced every year to catch up to the ever-increasing demand from our millennials, Gen Xers and Y’s and all others who are vying to purchase our limited housing inventory.
The increasing demand will only be satisfied if and when builders can increase their production of moderately priced homes, as the average price of a home in the U.S. has increased to above $270,000.
Decreasing interest rates will only have a positive impact on those who are buying what is available, which isn’t much (after the bidding wars and only one family, couple or person is declared the winner) and those who haven’t already refinanced.
The greater impact on our economy here and around the globe will occur as the corona (COVID19) disease progresses and the continued interruption and/or shut down of our supply chains continues, and as they say, when China sneezes (which they most definitely have) the rest of the world will all eventually catch a potentially dangerous and deadly cold!
Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has earned designations as a graduate of the Realtor Institute and a Certified International Property Specialist.
He can be reached by email: [email protected], or by cell: (516) 647-4289 to answer any of your questions, concerns or suggestions for his weekly column.