We are in unprecedented times. First and foremost, I hope that you and your family are doing well and staying safe. There’s also lot of anxiety right now regarding the coronavirus pandemic.
Amidst all this anxiety, anyone with a megaphone – from the mainstream media to a lone blogger – has realized that bad news sells. Unfortunately, we will continue to see a rash of horrifying headlines over the next few months. Let’s make sure we aren’t paralyzed by a headline before we get the full story.
Finding reliable resources with information on the economic impact of the virus is more difficult. For this reason, it’s important to shed some light on the situation. There are already alarmist headlines starting to appear. Here are two such examples surfacing this week.
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.
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. That’s certainly not Armageddon.
2. Fed President Predicts 30% Unemployment!
That statement was made by 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.
There’s a lot of misinformation out there. It is my commitment to support and guide you through these turbulent times and to communicate and keep you aware of what’s next. We are continuing to work for our clients at the highest level and support your real estate needs. With the stay-at-home order, we want to let you know that we are legally considered an essential business allowed to operate and remain open and following safety guidelines.
The good news is that we are collectively beginning to adapt to this unprecedented situation in some encouraging ways. In the real estate market, many agents are starting to offer virtual showings to reduce person-to-person contact. This allows buyers to make a more informed decision about the property and whether to get out and go see it.
Showings are still going on, just with much higher regard to safety and proper social distancing. And yes, even if we can’t shake hands on it, homes in the Washington, DC Area are still being sold. In fact, some buyers are more eager to buy now than ever. That might sound surprising, but it’s simple economics. The 30-year fixed mortgage rate recently hit 3.29%, the lowest on record since tracking started almost 50 years ago. This kind of low mortgage rate can take tens of thousands of dollars off the effective price of a property, once interest payments are factored in.
The massive government stimulus package has given many people hope that the economic impact of coronavirus will be contained. Finally, once we emerge from this situation, there is reason for optimism.
Unlike previous drops in home sales, like during the subprime mortgage crisis, this is not expected to last nearly as long. Demand for housing was especially strong before the coronavirus hit, and much of this demand is still there. What is undeniable is that we are in a unique situation, and rules are changing each day.
Please do not hesitate to reach out to me with any questions or concerns regarding your property, the market, or the real estate industry in the Washington DC area or need anything. I am here for you. You can reach me directly by phone or text at (703) 328-3434.