NAR’s Lawrence Yun Cautiously Optimistic About Market Rebound

Consumer Spending Down but Home and Garden a Bright Spot

Despite a decline in GDP, consumer spending, and business spending in the first quarter of 2020, Yun noted that residential investment, which includes home building, home sales, and remodeling, was actually up by 21% during the first three months—an indication, he said, of how strong the housing market was before the pandemic.

He also drew attention to the fact that personal income was up by 2% and personal savings jumped a remarkable 152%, related to curtailed household spending as the pandemic spread. Yun was hesitant to gauge the mindset of savers but offered more than one interpretation. “Are they waiting for the economy to reopen?” he said. “Or does it imply pessimism? There is certainly more money available.”

Noting that spending at grocery stores had predictably gone up in March while spending at restaurants had declined, Yun noted that restaurant spending had improved slightly in the last few weeks, showing a decline of just 60% to 70% from the same period last year as some restaurants found ways to continue serving customers by engaging in social distancing measures and offering takeout service.

And while clothing stores, sporting and hobby stores, and department stores all saw steep declines in consumer retail spending over the same period a year ago, building materials and gardening spending actually increased by 10.4%, a hopeful indicator. “People are upgrading their homes,” Yun said. “When the market reopens, that housing will go up in value. People are remodeling, working on lawn care. All things you do to sell a home.”

Jobs Rebound Possible in Education and Health

As grim as the unemployment numbers have been, Yun was encouraged by recent data. As of May 2, a reported 26 million people were jobless, in contrast to the high of 33 million who filed claims earlier in the lockdown. Yun inferred from the numbers that some people received unemployment checks for a few weeks and then got back to work, possibly in jobs in high-demand essential fields. He also said that it was important to watch for trends like these as a harbinger of improvement. “Even in good years people file (for unemployment),” he said. “We are looking for a flattening of the curve. When 1 million jobs are created in a week and less than 1 million file for unemployment, we will know the economy is turning for the better.”

Yun also noted that the biggest job losses in April were found in leisure and hospitality (7.6 million) and in education and health (2.5 million). However, he saw potential for the latter category to rebound quickly once the economy reopens. “I expect [education and health] to turn positive. People will need daycare. Hip replacement, knee surgery will be done again. These loses could be temporary.”

Home Prices and Sales

In addition to positive prognostications on the job front, Yun saw reason to be optimistic on the potential for home sales once the economy picks up steam. Of particular note were home prices, which he said were strong. “There is no meaningful downward trend,” he said. “If anything, they appear to be rising.”

Yun pointed to the current housing shortage as the source of the stable prices, and he predicted that the shortage could grow even more severe given that the usual spring increase in listings didn’t occur this year. He suggested that as the economy reopens, people will be ready to list. He noted that Georgia, which is beginning to reopen, could be a model for what we will see in the rest of the country as restrictions ease. “Listings are popping out,” Yun said, “and buyers are quickly grabbing homes.”

He added further that healthy home sales are possible even when the job market is uncertain. “Even in high unemployment times,” he said, “60 to 70 percent have employment. And we have record-low mortgage rates. The situation could be good.”