Watch for Home Sales Rebound as Economy Opens Up
Acknowledging the many unknowns in relation to the COVID-19 virus, Lawrence Yun, chief economist for the National Association of REALTORS®, sounded cautious optimism about where the economy is heading and highlighted positive indicators in the residential real estate market at the Residential Economic Issues and Trends Forum on May 13 at the 2020 REALTORS® Legislative Meetings. Yun predicted that steady and even rising home prices could point toward healthy home sales numbers once the economy reopens, and he saw signs that jobs could also rebound as stay-at-home orders ease.
Consumer Spending Down but Home and Garden a Bright Spot
Despite a decline in GDP, consumer spending, and business spending in the first quarter of 2020, Yun noted that residential investment, which includes home building, home sales, and remodeling, was actually up by 21% during the first three months—an indication, he said, of how strong the housing market was before the pandemic.
He also drew attention to the fact that personal income was up by 2% and personal savings jumped a remarkable 152%, related to curtailed household spending as the pandemic spread. Yun was hesitant to gauge the mindset of savers but offered more than one interpretation. “Are they waiting for the economy to reopen?” he said. “Or does it imply pessimism? There is certainly more money available.”
Noting that spending at grocery stores had predictably gone up in March while spending at restaurants had declined, Yun noted that restaurant spending had improved slightly in the last few weeks, showing a decline of just 60% to 70% from the same period last year as some restaurants found ways to continue serving customers by engaging in social distancing measures and offering takeout service.
And while clothing stores, sporting and hobby stores, and department stores all saw steep declines in consumer retail spending over the same period a year ago, building materials and gardening spending actually increased by 10.4%, a hopeful indicator. “People are upgrading their homes,” Yun said. “When the market reopens, that housing will go up in value. People are remodeling, working on lawn care. All things you do to sell a home.”