A Last Look
At last, we’ve reached the end of 2020 -- a year that will be remembered as the toughest in our collective memory.
Each of us has our own 2020 stories and if I tried to relay all the ways that people are hurting this year, I couldn’t do you justice, so I won’t delve deeply into the personal and professional challenges we faced. We grieve in our own ways, too, and then find ways to move beyond the pain: It’s in our DNA to survive.
This week, we’ll take a quick look back at where we were in terms of real estate markets, equities, global markets and governmental action from my first post on April 10 -- just about a month into the pandemic and business closures -- and where we’ve landed as we close out 2020.
Next week, when we kick off 2021’s posts, I’ll take a look at some ways that we can thrive, despite the challenges that are still ahead. Between now and then, best wishes for a safe, happy and healthy new year.
Residential real estate:
April 10: “...while the coronavirus is having widespread effects across the globe, there’s not enough data yet to make any interpretive observations...For example, National Association of Realtors (NAR) Chief Economist and Senior Vice President of Research Lawrence Yun suggests that, in the short term, ‘home sales will be chopped by around 10%, compared to what would have been the case, due to the spread of coronavirus.” A recent NAR survey found that 11% of REALTORS® are seeing a reduction in buyer traffic and 7% report lower seller traffic when asked about the impact of the coronavirus on their markets…’
...And, as a partial owner of an escrow company, I still see 85% of normal business in the Southern California marketplace…
Outwardly, every aspect of our economy, including real estate, seems to be severely impacted, but right now, the evidence doesn’t bear this out…Early surveys and feedback give every indication that deals are still getting done.”
December 31: “Deals are still getting done” didn’t quite predict the phenomenal recovery in the housing market, as well as the off-the-charts selling prices, with many markets increasing 20%. The factors in play prior to the pandemic -- low inventory (existing and new homes alike) and historically low interest rates -- were the foundation of a housing market explosion over the last 8-9 months. With only moderate easing in inventory and interest rates predicted to stay low, housing markets will stay steady, although I can’t see prices continuing to climb as they did in 2020.
“The national median existing-home price for all housing types rose to $310,800 in November, up 14.6 % percent from a year ago. Home prices have continued to escalate, and this marks the 105th consecutive month of year-over-year gains.”
Equities:
April 10: “For years, I’ve studied the significant correlated behavior between equity markets and real estate markets and have found a typical 90-day latency between behavioral patterns. However, due to this unusual and horrible situation, it’s unclear what near-term and long-term latency there will be.
In my opinion, however, there’s still a connection. I believe that in the 3rd and 4th quarters of 2020 -- when there’s predicted to be more stability in the economy, given an optimistic assumption that the pandemic situation will get better, at least to some degree -- we can determine directional patterns in equity markets, as well as volume.
US Chamber of Commerce, What is the K-Shaped Recovery?
Based on my experience, I believe that A-rated properties will recover and stabilize quicker than the secondary and tertiary markets, which will follow.”
December 31: Overall, the markets seem to feel very, very good about our potential to move past the pandemic, as well as for the relative stability that’s anticipated with the incoming Biden administration. Stock valuations are still rising beyond logic and those who can afford to invest are experiencing the upside of the “K”-shaped recovery that I predicted several months ago.
The challenge will be to enable continued investment (although not, I hope, in the way we’ve seen over the last year or so, with such extreme valuations) while also helping millions of Americans who are on the downside of the “K” -- those who have lost jobs that likely won’t be replaced anytime soon, who have little-to-no savings and whose housing and food security is shattered. (This U.S. Chamber of Commerce diagram does a nice job of illustrating this impact).
Still, we have to be careful of unwinding market catalysts -- interest rates, lack of inventory, new IPOs, new tech. As these catalysts soften, the fire they created often smolders.
Global markets:
April 10: “There’s extreme volatility -- a result of all of the unknowns -- and volatility has a way of manifesting and perpetuating movement. It's like dropping a basketball from a rooftop: Big bounces for a while, but then the ball finds equilibrium and stops. This is how markets are reacting to this unprecedented situation...Here’s what we do know: Currently, coronavirus has stopped worldwide economic activity in its tracks. The general consensus among economists, though, is that the global economy will begin to recover in the 3rd and 4th quarters of 2020. I say, time will tell.”
December 31: Around the world, the pandemic has taken a toll, but many economies have made significant recoveries in manufacturing and exporting. Like the U.S., though, tourism/travel, personal services, hospitality and leisure and the like are all hurting. So, as with the U.S., there are millions of people who are out of work and out of money. And with a mutated strain of the coronavirus quickly making its way around the world, it remains to be seen how the global economy reacts: Will we be over the initial fear and panic that made us shutter the world and fight to keep businesses open? Or will the reality of millions of lives lost and many more debilitated due to illness cause us to step back, again?
It’s an incredibly difficult call, but I’m hopeful that our national and global leaders will explore options and make decisions together this time around.
Governmental action:
April 10: “During a crisis, markets love regulation and government interaction. The federal government stated that as much liquidity will be loaded as possible and investors are responding. The government will save significant industries and major players within them, and investors take comfort in the knowledge that the federal government is creating a safety net by stating they’ll do whatever it takes.
Government intervention includes interest rates lowered to .25%, which will carry through to the real estate markets eventually. Other federal actions include loan forbearances and halted evictions, all of which support the real estate market.
Keep this in mind: Typically, real estate is an inflationary hedge. What’s interesting is that, one could argue, our economy is deflationary now. This means that our dollars are likely to be more valuable tomorrow than today, so deflation stops economic growth, because consumers don’t want to do anything. (An easy way to measure this is through increases in bank deposits and savings).
This is a potential issue for real estate recovery as far as pricing is concerned: It shows that people are holding onto cash, because they’re worried.”
December 31: With continued unpredictability in the executive branch, as well as continued deflection in the Senate, it’s hard to say exactly what the next few weeks will look like for average Americans as we get to what we hope will be a peaceful, smooth transition of power on January 20, 2021. It’s fair to say that at this moment, the current administration is ending things as dysfunctionally as they ran them for most of the last year.
Case in point is the extremely unproductive back-and-forth on a second stimulus bill: Those who need it most aren’t concerned with party politics; they’re simply trying to keep roofs over their heads and food on the table.
There’s a mirror on society as the Biden administration gets ready to hit the ground. Although many of the disparities and injustices existed for decades -- for centuries -- the pandemic has brought all of them to the forefront. We can’t hide, we can’t turn away and we shouldn’t want to: Instead, we need to find ways to create jobs and training and opportunities.
And, as we start 2021 together
In 2021 and beyond, we’ll be challenged to balance opportunities with humanitarianism and to provide access to education, job training, health care and economic growth for all, while fostering a healthier capitalism that supports innovation and entrepreneurship.
Can we step up to meet those challenges together?
Taking care of each other is better for everyone and when you have more than enough (knowledge, experience, time, money, food, clothing, technology), find a way to help someone else. You never know what single action, gift, kind word or lesson will be the one that changes a life for the better.
