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Where Is The Economy Going in 2020 - They got it wrong... #brokermac
June 17, 2020 at 7:35am | Mac Rogers
guys welcome back. In this video we will talk about the new economic numbers that are out with housing and unemployment and some leading economic indicators and see what the experts are saying this time around. If you've been watching my videos, I did
a local market update for Castro Valley, Dublin, Hayward and San Leandro a well as an all eastbay regional real estate market report last week. This is more on the national and comparing it to what is happening locally. What is going on? What did the
economist get right? What did they get wrong? And boy did they get it wrong.
My name is Mac Rogers, broker/owner of Albert Rogers Realty here in Castro Valley CA. If you are new to the channel I do real estate market updates as well as tips for both home buyers and home sellers twice a week. If you like the information, do me
a favor, please click the like button. It helps the channel get the information out to more people. Also if you want to follow me click on the subscribe button a well as the notification button.
So let's start with an update and see where we've been in the last couple of weeks and months and then let's look at the overall economy, unemployment and homeownership.
Let's start with the number of home showings by week. Take a look at the chart here. As you can see we started the year going up and then when the virus hit we just took a nose dive. But right around the middle of April that turned around and we continue
to go up in June. What this means is that buyers are coming back on the market and coming back in force! That is certainly the case in most markets in the eastbay.
Here's another proof that we are improving rapidly. Check out Zillow's June report. Pending sales up 24.5% month-over-month and new listings taken up 19.3% month-over-month.
Now something to keep in mind is that these increase in inventory numbers are still not enough. There is still a shortage of inventory out there. As a matter of fact our inventory numbers are still down compared to last year.
For historical context, housing inventory has been declining since 2010. Nationally, the average supply of inventory is 4.1 months. This means that with current inventory levels it would take four months to sell all of them. In the bay area, that number
is much lower at around 1 month or less. Just remember that the lower the number, the more buyers are out there.
Another leading indicator that is pointing upwards is the mortgage purchase applications. Since we bottomed out in early April, we just had an influx of applications. This is further pointing us to the fact that buyers are confident of what is going on
in the economy and that they are moving on with their home purchase plans.
Let's talk price projection. Now with all these leading indicators pointing upwards, where do you think the experts think we are headed? Five of the six sources all project that we end 2020 on the plus column. The highest forecast from the Mortgage Bankers
Association at 4.3%.
I got to tell you, in the bay area, with our prices already sky high, this projection almost always comes in higher. I've been helping people buy and sell real estate for eighteen years and it never seizes to amaze me how many people can keep affording
$700,000 to $800,000 as their first home let alone clients that buy in the $2,000,000 and above. This continued upward pressure on price is indicative of the lack of supply and the high demand for housing in our region.
Let's talk about the economy. A recent survey done by the Wall Street Journal asked economists when they think we will start to recover. A whooping 91.2% of those surveyed responded that the recovery is already underway or will be soon. This is very encouraging
Furthermore, when the economists were asked what type or what form of recovery we will have, 82.8% responded that it's either a Nike swoosh shape or V shape recovery. If you want to know more about the different types of recovery check out my other video
on the different types of economic recovery.
Most economists are saying that real estate will lead us out of this recovery. And here's why. The average impact of one home sale in the economy translates to $88,416.
It's not just real estate agents, mortgage lenders that are getting impacted when a home sells. There's a lot of other factors or expenditures that happens. From home improvement, home inspections to escrow and title, even couriers.
In California that number is almost double! The average economic impact of one home sale in California is $171,000. In 2019 there were 437,600 home sold in California. Multiply that by $171,000. That's almost a $75,000,000,000 impact to our economy.
Let's take a look at the unemployment numbers. Now it's worth noting here that I am not minimizing the loss of employment of anyone. These are families that are going through hardships and they are real and not just numbers.
That being said, take a look at these projections for May versus what it actually was. From the projections as high as 21.5% unemployment to an actual rate of 13.3%. We actually gained 2.5 million jobs in May versus losing more jobs. The sector that
gained the most is food service. Followed by construction. Even retail added 368,000 jobs which was a nice surprise.
Per CNBC, this 2.5 million jobs gain was by far the biggest one-month job surge in history since 1939.It's also interesting to note that 17% of those unemployed thinks its permanent and 83% say it's only temporary.
Now there's this issue being raised about a misclassification of those who are unemployed that were really not unemployed or vice versa. I think it's a whole lot of nothing there may or may not be an issue with the numbers but even if we added this
so-called misclassification the numbers are still good.
The economy still added 2.5 million jobs versus the economists' forecast of losing 8.3 million jobs. That was totally wrong. Overall we are seeing this economic disruption to be more deep but shorter in length.
Which brings is back to real estate. A gallup poll survey shows that 35% of Americans looks at real estate as a favored investment for the long term. I often always say that just look at the financial and tax benefits of home ownership and you will
understand why its such a great investment and how many investment types are there were you can partially pay for the investment get to use it and then 100% reap the appreciation? I can't think of any.
There's also the non financial benefits of homeownership like 93% said they are happier. 88% said buying a home was the best decision they ever made and 79% said they believe owning a home made them better.
So where do we go from here? Just last week we got hit by another disruption. The riots, protest, social unrest is another challenge that will test everyones trust and resolve on the economy and our government. Our economy driven by consumption, if
people can't go out because now they are afraid of not just the virus but violence, then this recovery or quick turn around that we are experiencing could just as easily turn the other way around.
Oh and what about the election? Let's save that topic for another update video. If you have any questions, comments or feedback, please leave them below.