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Wow some big words that study the behaviors of individual market participants— such as Microeconomics or Behavioral Economics? That is the question!

Wow some big words that study the behaviors of individual market participants— such as buyers, sellers, and business owners and how they affect the allocation of resources. Something I have been trying to share since the challenges of this Pandemic surfaced. Yes, it killed the spring buying season, but it may have created a pent-up buyer demand!

Surprisingly my first thoughts when this COVID-19 first hit the headlines, was that of maybe a flu type virus. My expectations were soft conditions similar to almost ten years ago. With mortgage rates at an all-time low has triggered buyers to take advantage and we saw a huge rebound in June, however in my opinion is short lived. This is not totally disappointing, as our country began to fall into an economic destruction that inevitably lockdown our world, people began to scream. Three months later COVID-19 life is setting in. Yes, we have experienced a significant amount of economic destruction here and worldwide. Bluntly said, we are in a recession however most experts say this will be shortly lived, compared to 1992, 2008 to 20-09 for examples. With low mortgage rates I belieSurprisingly my first thoughts when this COVID-19 first hit the headlines, was that of maybe a flu type virus. My expectations were soft conditions like almost ten years ago. With mortgage rates at an all-time low, has triggered buyers to try and take advantage. We saw a huge rebound the first in June, however in my opinion is short lived. This is not totally disappointing, as our country began to fall into an economic destruction that inevitably locked down our world, and “people began to scream!” Three months later COVID life is setting in. Yes, we have experienced a significant amount of economic destruction here, and worldwide. Bluntly said, we are in a recession however most experts say this will be short lived, compared to 1992, 2008 to 2009 for examples. With low mortgage rates, it’s my opinion we will begin to see the rise in home values as they accelerate a rebound the last quarter of this year. “Better Times Are Ahead!”

Does America’s administration know something we do not know? Is this political divide a hoax! Something that is distracting us from a positive outcome to the mayhem, from racism, to systemic outrage. Interesting enough May is growing positively better than  Does America’s administration know something we do not know? Is this political divide a hoax! Something that is distracting us from a positive outcome to the mayhem, from racism, to systemic outrage. Interesting enough May has shown a positive upward  trend, better than  April, the unemployment rate still stands at an elevated 11.8 percent, appears to be declining, and the U.S. economy shrunk by 5 percent in the first quarter, and the second quarter will show an ever greater contraction in economic activity.

When these distractions display themselves in crisis, there will always be some people We are experiencing some ugly economic numbers, and whenever the economy heads south, the effects are expected to be temporary. When these distractions display themselves in crisis, there will always be some people who will get on their soap boxes and forecast Armageddon for the housing market. As I have been saying all along, they will be wrong. I will not deny that some exceptionally talented economists including the National Association of Realtors Lawrence Yun, are calling for modest COVID related price declines.

A couple of weeks ago, Zillow put their weekly market report, showing data through June 27^th .http://ZILLOW  home prices will drop by 1.8 percent between now and this October, but it did say that price growth will pick back up again this winter. I wonder if this is just a way to entice sellers to use Zillow for their option when considering the sale of their property.

CoreLogic, a valued resource for Economists, Real Estate Brokerages, Appraisers and Realtors is indicating prices dropping by about 1.3 percent. http://https://wwwcorelogic.com/insights-download/home-price-index.aspx 1.3 percent between now and next April.

These two forecasts inspired my interest as a drop in U.S. housing values is extremely rare. In my research, since World War II, on an annualized basis, home prices have dropped only twice — the first time was a very modest drop of less than 1 percent in the summer of 1992, and the second, as you will all remember, was following the bursting of the housing bubble. I have shared this in some past posts recently.

So you ask, where are we headed when it comes to home values in 2020!

Some of you might remember the beginning of this year I shared our National Association Chief Economist Lawrence Yun forecasts U.S. home prices rising in 2020 — with prices up by 5 percent — decent growth, but still the lowest pace of appreciation since we emerged from the Great Recession. I have been hopeful that with the low interest rates it would inspire buyers to relocate, as we are all aware, things have certainly changed. When COVID-19 hit, the dynamics of housing markets across the country changed, and to really understand those dynamics we can’t simply look at monthly aggregated data, but need to turn our attention to higher frequency data — and I tend to listen and watch the market analysis that provide weekly numbers, and unsurprisingly, the country started seeing significant drops in list prices, pending sales and closed sales starting in early March through the middle of April. May being soft in expectations.  June rallied the first three weeks, I was somewhat surprised with the sizable jump in the number of homes that went pending, and some with multiple offers. No doubt, the GOP Convention moving in part to Jacksonville and other indicators that the COVID-19 curve was subsiding. Clearly the housing market was reacting to these indicators.

Sale prices also started to pull back, but not until the end of April, as there is always a lag. So given this information, I think it is very safe to expect home prices to have dropped in May, and this might be why some are forecasting a longer than expected withdraw in sales. It appears that we are beginning to get a handle on the virus, business activity has modestly started to rise, and I hear new construction is spawning some real interest by the builders offering as low as 2.75 interest rates. Will this be the same with resales? I do not feel we will see these trends till possibly late September, October.

When I look at numbers over the past few weeks, I see new listing activity is somewhat soft but not everywhere — but in many markets. Pending sales due to the stampede of buyers the first three weeks of June has subsided due to Florida being labeled a hot spot for COVID-19. Some say the median list price of homes coming to market has begun to rise and is now close to the pre-COVID-19 peak we saw in February. I do not see this in our region.

When I look at numbers over the past few weeks, I see new listing activity is somewhat soft but not everywhere — but in many markets. Pending sales due to the stampede of buyers the first three weeks of June has subsided due to Florida being labeled a hot spot for COVID-19. Some say the median list price of homes coming to market has begun to rise and is now close to the pre-COVID-19 peak we saw in February. I do not see this in our region.

What does this mean?

The pandemic-induced slowdown killed a significant portion of the spring buying season, but there was a side effect and that was the creation of significant demand in new construction. Not so much on resales. Many home buyers — who had pulled back from the market earlier in the year because of COVID-19 are beginning to see a rise again. We will see Buyers reappear. Mostly because the resale home prices are lower than expected and the low interest rates. We know this because applications for new mortgages are on the rise, not just week-over-week, but year-over-year, and I believe that the cancelled spring buying market will become a fall and winter buying market.

Of course, not all markets are created equal. There are areas across the country that were hit harder by COVID-19 than others, generally markets with major leisure tourism industries. No doubts these areas will take longer to see a housing recovery, but they will recover at some point. I agree with most of the economists who are looking for prices to drop but as I have said, “ as we move through the summer, we will again begin to see the home values rise again.” Perhaps a modest amount, not as earlier predicted and I believe noticeably short lived as buyer confidence returns and mortgages remain competitive. I have always reflected on human nature, in challenges like this we tend to freeze up when faced with anything that scares us. Perhaps you can say we have experienced a FREEZE!

We are not there yet, but I absolutely believe that we are on the way to recovery. Housing will recover, the confidence the markets have is an indication. and anyone who is still hoping for a 2008-style collapse will be sadly disappointed.