Metrostudy hosted a webinar last week covering the economic impact of COVID-19 and what it means for the housing market. Chief economist Ali Wolf offers a positive outlook as we all learn to cope with the current situation.
The anticipated timeline for return to normalcy is currently set for the end of the month, vaccines are being developed, as are faster tests, and the public has digested the situation; we no longer feel the shock of a celebrity or world leader testing positive, she said. We also know that builders are remaining positive despite COVID-19 related disruption.
[Related: Builders’ guide to managing COVID-19]
However, she also predicted a continual rise in delinquency rates as unemployment rises. This is only one of the problems she predicts for the market the longer the virus effects our day-to-day. Issues like growing debt, changes in spending behavior, and changes in qualifications for housing all become more pressing as time wears on.
Tim Sullivan, Metrostudy’s senior managing principal, weighed in that the virus effects industry and economy like a natural disaster. This is “more like Hurricane Sandy than the 2008 mortgage meltdown,” he said, as it hits all at once. Though home-buying traffic is down right now, he expects it to increase as home builders “continue to work diligently.”
Impact on housing market
But what about the housing market? Wolf runs down some states’ individual responses. Michigan, Virginia and Vermont have deemed construction nonessential, but policy leaders in New York and Washington, D.C. have deemed housing essential, a win for the industry.
Colorado has also recognized that construction is essential. Gov. Jared Polis exempted the construction industry from the statewide stay-at-home order, but individual counties may have their own restrictions regarding social distancing.
However, that leads into the ethical implications that we have begun to see in other industries, as we want to keep ours alive and keep up the economy, but also keep workers safe. In recent weeks, Wolf mentioned, Amazon and Instacart workers went on strike, and more are following suit. That being said, Wolf highlighted that managers of construction projects are aware of both the risks and ethical implications.
As she looks at the continual decline of the economy, Wolf specifically discussed the breakdown of who’s getting stimulus checks (80% of Americans) and what they’re doing with that money. More than half are using them for life expenses. The next largest sector is just putting the stimulus money right into savings. Based on her data and analysis, the small fraction of Americans using the check for a fun or big-ticket purchase indicates how tight on finances Americans are feeling right now.
Wolf also noted that checks have not been adjusted for cost of living, and this factor will impact some places more than others. Denver, in particular, is one city where the checks aren’t expected to make the difference people need them to.
In terms of managing expenses, Wolf largely looks to the Great Recession of 2008 to predict how we should spend and how the economy will react. Her opening advice: start acting now, don’t wait for policy. Right now, predictions for the economy are still hopeful, with the recession expected to follow the shortest model for returning to normalcy, as long as Americans are able to do what they can to keep their purchasing normal, and assuming we slow the spread of the virus soon.