John Burns and Dean Wehrli recorded this podcast episode on March 19, 2020, right after our second weekly client webinar amidst the Covid-19 crisis. They discussed some of our market conclusions to date and our best estimate of some of the changes we believe will occur.
We will continue our weekly webinars for our research subscribers, who are approximately half of our revenue and are going to help our firm through to the proverbial light at the end of the tunnel. Their willingness to share insights with us during these times is making us all smarter. We are so fortunate to have them, and we are certainly willing to let you join the club by contacting Sara Newton-Mahony at firstname.lastname@example.org.
In a nutshell, our team from around the country found many interesting insights:
- Healthy market. With a HUGE sample size, we confirmed that both the rental and for-sale housing markets are holding up far better than most would think, particularly if you look at how far the home builder, apartment, SF rental and building product stocks have corrected. Even one of our suburban Seattle clients had a great week.
- Historical comparisons. Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices), and some very cutting-edge search engine analysis by our Information Management team showed the current slowdown is playing out similarly thus far.
- Be prepared for much worse. Our outlook, however, is far more negative than historical comparisons and some of the economist forecasts we have seen. As we have long been reporting in the Forecast Risks section of our monthly US Housing Analysis and Forecast, many non-housing industries were overvalued and overlevered heading into this, as were many governments and consumers. Overvalued and overlevered companies always suffer the most during a downturn. We listened to quite a few “economist expert” webinars in the last week, and we believe even their downside scenarios must assume that a lot of things go perfectly.
- Light at the end of the tunnel. We are seeing some major industry and consumer shifts that will be very positive for both new home construction and SF rental once the market stabilizes. Buyers are much more interested in new homes than resale homes, and the SF rental firms have seen apartment renters moving in to minimize their risk of exposure to Covid. We will be summarizing a lot more of the opportunities in next Thursday’s research client webinar.
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