All eyes are on the American economy. As it goes, so does the world economy. With states beginning to reopen, the question becomes: which sectors of the economy will drive its recovery? There seems to be a growing consensus that the housing market is positioned to be that driving force, the tailwind that is necessary.
Some may question that statement as they look back on the last recession in 2008 when housing was the anchor to the economy – holding it back from sailing forward. But even then, the overall economy did not begin to recover until the real estate market started to regain its strength.
As Mark Fleming, Chief Economist of First American, recently explained: “Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But there are distinct differences that indicate the housing market may follow a much different path. While housing led the recession in 2008-2009, this time it may be poised to bring us out of it.”
Fleming is not the only economist who believes this. Robert Dietz, Chief Economist for the National Association of Home Builders, in an economic update last week explained: “As the economy begins a recovery later in 2020, we expect housing to play a leading role. Housing enters this recession underbuilt, not overbuilt…Based on demographics and current vacancy rates, the U.S. may have a housing deficit of up to one million units.”
Not only do our housing experts believe the economy is ripe for recovery, but even more so, do many of the country’s top economists. They feel confident that recovery should start in the second half of 2020. As businesses slowly start to reopen, moving forward in strategic phases, business activity will help bring our nation back to life.
“I think there’s a good chance that there’ll be positive growth in the third quarter. And I think it’s a reasonable expectation that there’ll be growth in the second half of the year… So, in the long run, I would say the U.S. economy will recover. We’ll get back to the place we were in February; we’ll get to an even better place than that. I’m highly confident of that. And it won’t take that long to get there.” Jerome Powell, Federal Reserve Chairman
We’re certainly not out of the woods yet, but clearly many experts anticipate we’ll see a recovery starting this year. It may be a bumpy ride for the next few months, but most agree that a turnaround will begin sooner rather than later. During the planned shutdown, as the economic slowdown pressed pause on the nation, many potential buyers and sellers put their real estate plans on hold. That time coincided with the traditionally busy spring real estate season. As we look ahead at this economic recovery and we begin to emerge back into our communities over the coming weeks and months, I would expect to see a strong, compact, and hectic “late spring market” hit.
Bottom Line to Relocation
Circling back to the strong impact real estate will play, every time a home is sold it has a tremendous financial impact on local economies. As the real estate market continues its recovery, it will act as a strong tailwind to the overall national economy. As we all know in relocation, a strong housing market means relocations will continue to prosper, overall costs to corporations should see a slight decrease due to fewer requests for expensive exceptions to policy (e.g. extending corporate housing), and transferees will be more enthusiastic to accept a relocation when they have a home to sell and one to purchase when both local markets’ housing is strong.
What is it that makes the housing market so strong? Three important elements spearhead this recovery:
First, the financial requirements and regulatory changes made to strengthen our mortgage markets after the last recession,
Second, higher credit scores and larger down payments being required to qualify and purchase a home and,
Third, the nationwide shortage of available inventory as discussed above.
This time, to our “relocation delight,” the housing market was in great shape when the virus hit.
Have questions or want to learn more about Lawrence Relocation Services please contact Ginny Taylor, CRP/SGMS, by email or by phone at 540.966.4550.