I have been listening to lots of people over the past few weeks, analyzing data, thinking, and I now feel confident that we are about to head into a REAL ESTATE FIRESTORM – a good one – and here is my reasoning:
- PENT-UP DEMAND. Never before in the history of the USA have real estate showings been forcefully ceased for an extended period of time. Never. And certainly not for 2-3 months. Pent up demand happens many times through business and economic cycles when people pause or shifts occur…..but showings have never stopped. Add the pause with the ‘wait-and-see’ and you could have DRAMATIC demand when markets open up.
- INVENTORY. In most areas around the country inventory levels keep shrinking. This will escalate dramatically over the next few weeks and months, but 2-3 months inventory deprivation is unprecedented! All markets and pricing are driven by supply and demand.
- LOW INTEREST RATES. They are as low as you can go. Seldom if ever has there been a weak real estate market in a low interest rate environment.
- JOB LOSSES. Yes, millions of jobs have been lost. But the majority of homeowners don’t work at a checkout counter or wait tables. Unfortunately most job losses have been lower salaried employees. Fortunately, a large majority of the COMPASS clientele will not be directly impacted by these job losses and hopefully many of these jobs will come back as the economy recovers and we return gradually to normal. Job losses will impact our economy for sure, and hopefully many/most can be recovered ASAP. This will require new skills in new industries that emerge and prosper. Some industries may experience long term damage.
- GOVERNMENT STIMULUS. Never before in the history of the planet has so much government fiscal stimulus entered the markets. Probably over $9 TRILLION. That’s almost TWICE the size of the economy of Japan, the third largest economy in the world!
- THE HUMAN SPIRIT. Have you ever watched a time-lapse of leaves opening? The leaf buds at first are small….then they start to grow and swell…..and they continue to expand….but often they hold back as they sense the potential danger of a late frost…..they ache to open….and then the right moment arrives and they BURST open. Their pent-up energy is staggering. The human spirit is not that different when contained and restrained. Especially over an extended period of time. Right now, the human spirit to recover, re-build and get back to work feels EXTRAORDINARY!
So there you have it. That’s my opinion. And it is just an opinion. I also believe different things are certain to happen in different parts of the country and within states, cities and towns as the one thing that will NEVER change in real estate – possibly the ONLY thing – is that it is and always will be an ULTRA-localized industry.