Tag: recovery

The K-Shaped Recovery: What Is It?

You’ve probably heard of a W-shaped recovery, even if you don’t know what it means. This refers to a false start in recovery, whereby the economy is improving in one sector, but doesn’t have the momentum to continue recovering, so it wobbles a bit. This has been what experts believed the current recovery would be like. Now, though, some people are wanting to call the recession and recovery K-shaped. What does this mean? It means that some sectors will recover and retain their momentum, while other sectors haven’t yet left the recession and continue downward. In other words, the recession has very clearly disproportionately affected various groups.

More specifically, this recession has had comparatively little impact on wealthy individuals. People with higher paying jobs are more likely to work in fields that can be done from home, so they haven’t been out of work during the pandemic. People who have the capital to invest in stocks as their primary means of income don’t have to worry so much about the pandemic, since stocks can’t get sick. They’ve actually been on an upward trend since before the lockdowns even began. Even those higher-income workers who did experience losses won’t have as much necessary expenditure proportional to income as those living paycheck to paycheck. This means that the recession has significantly widened the already large income inequality gap.

Photo by Volodymyr Hryshchenko on Unsplash

More: https://journal.firsttuesday.us/2020-recession-stretches-income-inequality/74733/

Job recovery will be slower than expected

Reports demonstrate record job gains in California in the last few months, nearly 700,000. But that doesn’t mean we’re actually making new jobs. It means that we lost so many jobs this year that even recovering a small percentage of them is going to look like a large number. There were actually over 2.7 million jobs lost in California between December 2019 and April 2020, significantly more than were lost in two years during the 2008 recession. So we’re still a long way off from returning to the December 2019 peak, let alone generating new jobs.

Federal assistance has been necessary to keep the economy floating, but it’s also been inadequate. We’re going to need a lot more help. A COVID-19 vaccine is a solid step, allowing more people to return to work. It’s not going to be enough, though, since the economy was already on a downward trend before COVID-19 — recall that the peak was December 2019, three months before the lockdowns. The recovery is expected to be W-shaped, with some unstable gains from now through 2021, and no clear upward trend until 2022 or 2023. Even then, job recovery will have just started, and the real estate market is going to need even more time after jobs start back up.

Photo by Ibrahim Rifath on Unsplash

More: https://journal.firsttuesday.us/job-losses-will-inevitably-continue/73104/

Impact of COVID-19 on current market

As of June 10, while the California housing market has started to recover, it appears that recovery is slowing, not speeding up. California officially entered the recession in February, and we’ve come a long way since then, but there’s still plenty more to go.

Average home sales per day decreased in the second week of June following a modest increase in the first week, and the overall trend has been downward. Pending listings are still going up, but by less than 3% in 3 of the prior 4 weeks before June 10. New listings have been mostly flat. Two-thirds of buyers are expecting to get lower prices than they’re getting, and more of them are backing out because of financial considerations, despite high demand.

On the bright side, sellers are more optimistic. 40% of sellers believe it is a good time to sell, up from 29% in May, though still far below the pre-crisis level of 60% or more. Sellers recognize that while buyers may not have the funds they wanted, they’re still looking to buy. More buyers are applying for mortgages while mortgage forbearance has dropped from almost 1.1 million in mid-April to only 34 thousand in early June, and home showings are finally above the levels in 2019 and still going up.

Recovery has certainly slowed, but we’re going in the right direction. Now is a good time for both buyers and sellers. Call or email us and we’ll discuss business.

Photo by Frank Busch on Unsplash

More: https://www.car.org/knowledge/pubs/newsletters/newsline/covid61020

Housing Recovery Will Take Both Time and Action

According to a recent poll of readers of the Real Estate journal First Tuesday, the most optimistic recovery date from the current recession is late 2020, with 30% of respondents hopeful for a quick rebound. A quarter of respondents believe that recovery will be tied to a COVID-19 vaccine, which is predicted to arrive no earlier than mid-2021. 45% don’t expect recovery until 2022.

Benjamin Smith of First Tuesday agrees that a COVID-19 vaccine is important to recovery, but warns that there are other aspects at play. Real Estate as a business does depend heavily on in-person interactions, even though much of the work can certainly be done online or via email, and lockdowns have, without a doubt, slowed down business. Smith is careful to note, however, that the market was already on a downturn before COVID-19 hit, merely speeding up and exacerbating an impending recession. Two important factors in the downturn were falling inventory and insufficient construction.

While a vaccine can help open up agents, buyers, and sellers to safely meet up and discuss business, the underlying causes still need to be addressed, and people will need time and government intervention to recover their finances. This places recovery almost certainly later than mid-2021, and very likely further out. Fortunately, low interest rates mean buyer purchasing power will be relatively high once they regain their financial stability, meaning home prices aren’t likely to suffer as long as interest rates remain low.

Photo by Jens Behrmann on Unsplash

More: https://journal.firsttuesday.us/the-votes-are-in-housing-market-slated-for-a-late-recovery/71917/