In the 20th COVID-19 Housing Outlook webinar, Ali Wolf, chief economist at Zonda, flipped the previous webinar’s introduction of three components that have surprised her and began November’s monthly update with three items that will make everyone feel good, including when there’s a trusted vaccine, when another fiscal stimulus package is issued, and when the election is resolved.

With the news about Pfizer’s and Moderna’s somewhat successful trials, health experts predict the first doses of the vaccine could start rolling out as early as December, with health care workers and first responders at the front of the line and high-risk individuals after the start of the new year. If everything goes to plan, the world may see some semblance of normal life in six to 12 months, she says.

Unfortunately, hospitalizations across the country are at the highest level they have ever been. Jamie Dimon, CEO of JPMorgan Chase, says, “It’s not the time to act like it’s over. Let’s double down and get through COVID the best we can.” Wolf continues, “We have the light at the end of the tunnel, but if we let things collapse between now and that six- to 12-month period, we’ll be having very different conversations.”

The most recent jobs report revealed the country has recovered 54% of the jobs lost in March and April, and the headline unemployment rate is now below 7%. But like Wolf has stated before, the current 6.9% rate does not include roughly 4 million people who were working in February and likely because of COVID can’t any longer, bringing the unemployment rate closer to 9%. Plus, of those unemployed, a third of them are long-term unemployed.

Wolf notes things may still get worse before they get better. With high unemployment, no stimulus, record hospitalizations, new shutdowns, and people self-selecting themselves out of the economy, there’s a risk for a double-dip recession.

“Right now, given all of these, we are at a higher risk than we’ve been in the past,” she says. But, if legislation passes a new stimulus package soon, “we can maintain baseline. We can get through the winter months without having people lose their homes, without more businesses going out, and without more people becoming permanently unemployed.”

Looking at the election, Wolf and the Zonda team focused on five key points: the stock market, COVID-19, stimulus, taxes, and housing. As of Nov. 18 when the webinar aired, the stock market relaxed under the assumption of a divided government. The president-elect is exploring mask mandates in federal buildings, but a national shutdown is likely off the table. Economists are pushing hard for a stimulus package to help the nearly 15 million people who will exhaust their unemployment insurance. There’s still some uncertainty with taxes, but state tax increases are “very likely” regardless of who’s in power, according to Wolf. [Read more on these five topics in one of Wolf’s most recent BUILDER article here.]

Real-Time Housing Stats
Tim Sullivan, senior managing principal at Zonda, started the Real-Time Housing Stats portion of the webinar with some feedback statements from the field, including contracts are not the problem, supply is; permits are often taking two or three times longer than before; subs are being stretched; a lot of land acquisition jobs are being posted; and price ceilings are starting to be mentioned.

Sullivan says the last statement about price ceilings “jumps to the surface,” as the industry sees “a little pushback on pricing” this month. During the month of November, 42% of builders reported their gross contract sales had slightly decreased or significantly decreased, compared with 29% in October.

Additionally, only 83% of builders raised base prices in mid-November, compared with 90% in mid-October and 94% in mid-September, showing some softening. For those builders that increased base prices, Zonda data shows $3,000 to $5,000 is still the “sweet spot.”

Going into 2021, the industry is seeing a 15% drop in project count year over year, and lot supply is not helping the situation. The Zonda New Home Lot Supply Index shows at least a 10% year-over-year decline and a 30% to 35% decline compared with 2015.

“This becomes challenging from the standpoint of meeting our projections for increasing sales,” says Sullivan. “But, when you talk to the builders and you talk about which way they think they are going to go with speculative inventory, generally, it’s positive.” Nearly 74% of builders think they’ll start the same or more spec homes next year.

In addition to land, builders say government services (52%, up from 48% last month), labor shortages (37%, up from 29% last month), and supply disruptions (68%, up from 57% last month) also have potential to impact 2021 sales plans.

On the other hand, work from home is still creating opportunities. Fifty-eight percent of builders say the volume of out-of-market buyers has increased in comparison with this same time last year. The list of top cities people are moving to has stayed relatively the same, with the exception of Seattle, which moved from No. 1 in 2019 to No. 8 in 2020.

Wolf also highlights that “distance creep” is real for some markets, where people that used to live less than 15 miles or 15 to 25 miles away from core city business districts last year are moving more than 25 miles away this year. Atlanta, Boston, Detroit, Sacramento, Nashville, and San Francisco all made the list among others.

The next COVID-19 Update webinar will take place on Dec. 16 at 2 p.m. ET/11 a.m. PT. Click here to register.