Brookings maps the U.S. counties with industries that could take a hit if China’s proposed tariffs are enacted.
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In the time since the previous Meyers Research COVID-19 Update webinar, a number of U.S. states have made plans to “open up” certain businesses within the next week.

This week, Ali Wolf, chief economist at Meyers Research, calls Georgia’s plan the “most comprehensive.” As of Friday, April 24, gyms, bowling alleys, nail salons and tattoo parlors can reopen, followed by restaurants and movie theaters on Monday, as long as they adhere to social distancing rules. The plan has drawn criticism from all sides, though Wolf says this move could be a “test” of whether the economy can reopen safely.

On the housing front, the FHFA has established that mortgage servicers will be responsible to pay for loans in forbearance for four months, rather than the twelve expected, and Fannie and Freddie have agreed to buy loans that go into forbearance within one month of closing. As of now, 6.0% of mortgage loans are in forbearance, up from 0.2% on March 2nd.

Single family housing starts have officially fallen -18% month over month, up 2% year over year. Existing home sales have fallen -8.5% MOM, while the Meyers New Home Pending Sales Index, which tracks contracts rather than closings, is down -33% MOM.

The funding for the PPP small business loan program has run out, and Congress has passed an additional $310 billion in funding in a pending relief package. Of the industries applying for PPP loans, “construction” (both residential and non-residential) leads the nation in loan approvals at almost 14%. Wolf notes that builders who work with banks are more likely to be approved, and that spec-only builders are generally not eligible, though the NAHB is working with federal officials on this front.

An additional 5.2 million IJCs were filed in the previous week, up to 22 million total as a result of COVID-19. These were followed by 4 million more claims as of April 23rd, bringing the new total to 26.2 million. Hawaii leads the nation by share of employees that have filed for employment at 22%, followed by Michigan and Rhode Island at 21% each. While Florida’s share of claims is among the lowest at 6%, Wolf believes the share might be kept artificially low by slow approvals and outdated systems.

In the multifamily space, Meyers multifamily expert Kimberly Byrum points to three main trends: 55% of multifamily developers have reported construction delays, many of them related to permitting and closed governments; online leasing is bridging some of the gap in lost lease activity; and 89% of renters have paid their rent as of April 19th, compared to 93% over the same period the previous month.

How Are Consumers Feeling About Housing?

The Mortgage Bankers Association’s Conventional Market Purchase Index, which tracks the number of home contracts in a given week, fell 36% last week on a year over year basis. It has now fallen 31% YOY this week – a 5% improvement, though still the lowest index reading since 2016. New listings are off by 50% on Redfin, compared to 2019’s listing numbers, which Wolf says will slow overall transaction volume.

However, Google search history for “should I buy a house?” is at its highest rate since 2004. Based on this information, Wolf emphasizes that there is curiosity about home buying, and that consumers are interested in knowing whether now may be a good time to buy. “How much house can I afford?” is also at its highest search term level in the past year, with the highest concentrations in Boise, Idaho, Raleigh-Durham, N.C.; and Richmond, Va.

However, Wolf cautions that consumers can be fragile. Although today’s uncertainty is on a very different scale, she compares the current situation to the fourth quarter of 2018, when the main factors driving slowing home sales were fear and affordability. “What we can learn from that,” she says, “is that…it took seven months until the start of the recovery, and twelve months until we were fully recovered.” She considers this the best-case scenario, that consumers may be slow to ramp up home sale activity to its previous point.

At this stage, assuming America begins to open up in May, Wolf considers a V-shaped recovery to be too sharp to match the current situation, and a U-shape too long and too abrupt in its rebound. In her own words, her forecast shape looks more like the Nike logo, with a steep drop followed by a 16-20 month recovery in fits and starts.

Real-Time Housing Stats

Based on conversations with Meyers’ builder partners, senior managing director Tim Sullivan notes that, following last week’s conclusion that the “initial shock” was over, “some green shoots” have appeared on the housing front.

This week, for the first time since after March 1st, BDX’s Google National Consumer Traffic Index has trended positive on both metrics, up 11% week over week and 5% YOY as of April 18th. Based on responses to a survey, 68% of respondents say that their plans to move or not move have not been changed by the situation. Nearly 50% would prefer to see a home in person with an agent, while 25% would prefer to go alone.

While home sales are ongoing, these sales, cancellation rates, and optimism are “inconsistent” from region to region. Many of the observed cancellations are related to financing. While no region reports conditions are exactly the same as they were in Q1 2020, builders in Texas, Raleigh, N.C., Charlotte, N.C., Atlanta, and Tampa, as well public builders in the Midwest and mid-Atlantic, report that things are going fairly well. Builders in California and Colorado report uncertainty, while conditions for builders in Orlando and the east coast of Florida are not so good. This is also true at the national level for land acquisition, liquidity availability, and the active adult market.

Big concerns include mortgage underwriting, liquidity, supply chain disruption, raised taxes or permit fees, and a potential flood of resale homes in local markets.

Almost 50% of builders report that contract sales have slightly or significantly increased – up from 20% the previous week. Sullivan still notes inconsistency between builders – some nothing that “this week felt better”, while others say they have had “no sales since early March.”

Again, almost all builders – 93% - have kept base prices flat, while 5% have actually raised prices. Thirty-nine percent have increased incentives, while 28% reported an increase in cancellations, down from 31% last week. The majority of builders – 71% - have left staffing unchanged. Ten percent have laid off staff, 8% have furloughed staff, and 11% have cut pay or benefits for all or a portion. “But it is not happening to the extent we saw in the Great Recession, when most building companies laid off a huge amount of their staff,” Sullivan says.

As far as land and lot acquisition, 94% of builders report that they are pausing on acquisitions or monitoring land conditions for a chance to make a move, up from 78% the previous week. Quick move-ins are trending upward, though builders are being very careful on specs. Over half of builders, 60%, expect that they will be within 80% of their home plans at the start of the year, while 22%-23% expect to be off by more than 50%.

The next COVID-19 Update Webinar will take place on April 29th, 2020. Click here to register.