22 May Home Sales Down, as Expected
Both the stock and bond markets are relatively flat in early market trading, as investors digest President Trump’s comment stating that he will not shut down the U.S. economy again if we are hit with a second wave of Covid-19. Since both options would come with a significant price, round two would be a lose-lose situation regardless for the stock market, which President Trump has seemingly tied the success of his presidency to. It seems that local governments will have the ability to address the situation should it arise. For the time being, the plan will be for economies to open slowly, putting safeguards in place to help minimize the continued spread of this horrific virus.
In housing news, the Existing Home Sales report for April showed that buyers shopping for homes in February and March decreased by 17.8%. This represents the single largest decline since July, 2010, when the home buyer tax credit that payed buyers to purchase a home expired. One contributing factor to the massive decline was inventory levels dropping 19.7% on a year-over -year basis. Clearly, many potential home sellers have been reluctant to have strangers walk through their home in the middle of a health pandemic. As soon as people feel safe, we can expect to see a sharp rise in the number of available homes; partially due to the pent-up demand, and partially due to people needing to adjust to a lower level of income going forward. Further, with many real estate investors getting burned by tenants not paying, we expect to see many investment properties hit the market. It will be an interesting 18 months for sure.
With the Fed maintaining a tight reign over mortgage interest rate volatility, there remains little risk/reward to float.