Recently, Dr. Albert Lee, Founding Partner of Summit Consulting and host of the Complexity Simplified Podcast, conducted an informative podcast tackling various issues surrounding COVID-19 pandemic and its impact on the economy. Lee interviewed CoreLogic’s Chief Economist Frank Nothaft.
When asked about how the effect on the labor market and the economy following the COVID outbreak was directly affecting the housing market, Nothaft said: “It’s amazing how much things have changed just in the last six weeks. The year started off with such a positive tone in January and February. It looked like we were well on track to having a 2% economic growth and another year of expansion with a 50-year low in the unemployment rate. And the housing market responded very positively to the good economic conditions and low mortgage rate.”
Nothaft then recalled how things quickly changed: “But in the last six weeks, it’s been like a 180-degree turnaround. It now seems pretty clear that the macro-economy has slipped into a recession—and it seems like it’s going to be a pretty tough recession, too, at least for the next six months.”
He then predicted that economic activity, in regards to GDP, may actually be down 5 percent in 2020 compared to 2019. He further explained: “Naturally, with so many individuals losing their jobs—losing their incomes—that takes away their purchasing power to buy all sorts of things, and houses [are] one of those items that are now out of reach for people who have lost their jobs.”
Nothaft then offered some relevant insights about current trends in the housing market: “We’ve seen that the number of new pending sales has slipped dramatically since the middle part of March. We’ve seen that the number of new listings coming onto the market for the week ending on March 29 were down about 30% from the same week a year ago, and this is at a point where we are usually at the Spring home buying season, which is usually the time when new listings are just pouring out of the marketplace. They had been up in January and February, compared to a year prior, so it’s a startling turnaround to see a 30 percent drop in new listings.”
Another somewhat startling trend is the dramatic increase in withdrawn offers, according to Nothaft. It was also divulged that loan applications for home purchases are also down 28% from a year ago in the week ending on March 1.