In-The-Know Real Estate Blog April 30, 2020

The Search for Our Economic Recovery Timetable

Last week, we discussed how most projections from financial institutions are calling for a quick V-shaped recovery from this economic downturn, and there’s research on previous post-pandemic recoveries to support that expectation.

In addition, we noted how there are some in the business community who believe we may instead be headed for a U-shaped recovery, where the return to previous levels of economic success won’t occur until the middle of next year. Yesterday, Reuters released a poll of U.S. and European economists which revealed that most surveyed are now leaning more toward a U-shaped recovery.  Here are the results of that poll:

Why the disparity in thinking among different groups of economic experts?

The current situation makes it extremely difficult to project the future of the economy.  Analysts normally look at economic data and compare it to previous slowdowns to create their projections.  This situation, however, is anything but normal.

Today, analysts must incorporate data from three different sciences into their recovery equation:

1. Business Science – How has the economy rebounded from similar slowdowns in the past?

2. Health Science – When will COVID-19 be under control?  Will there be another flareup of the virus this fall?

3.  Social Science – After businesses are fully operational, how long will it take American consumers to return to normal consumption patterns? (Ex: going to the movies, attending a sporting event, or flying).

The challenge of accurately combining the three sciences into a single projection has created uncertainty, and it has led to a wide range of opinions on the timing of the recovery.

Bottom Line

Right now, the vast majority of economists and analysts believe a full recovery will take anywhere from 6-18 months. No one truly knows the exact timetable, but it will be coming.

In-The-Know Real Estate Blog April 3, 2020

What the Experts are Saying: Looking to the Future

As our lives, our businesses, and the world we live in change day by day, we’re all left wondering how long this will last.  How long will we feel the effects of COVID-19?  How deep will the impact go?  The human toll may forever change families, but experts and business owners anticipate the economic impact will rebound with a cycle of downturn, followed by economic expansion like we’ve seen play out in the U.S. economy many times over.

Here’s a look at what leading experts and current research indicate about the economic impact we’ll likely see as a result of the coronavirus. It starts with a forecast of U.S. Gross Domestic Product (GDP).

According to Investopedia:

“Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of the country’s economic health.”

When looking at GDP, the measure of our country’s economic health, a survey of three leading financial institutions shows a projected sharp decline followed by a steep rebound in the second half of this year. (This is assuming that the COVID-19 pandemic is significantly more controlled as a result of our adherence of local, state and federal mandates.):

A recent study from John Burns Consulting also notes that past pandemics have also created V-Shaped Economic Recoveries like the ones noted above, and they had minimal impact on housing prices. This certainly gives hope and optimism for the near future after the crisis passes.

With this historical analysis in mind, many business owners are also optimistic for a bright economic return.  A recent PricewaterhouseCoopers survey shows this confidence, noting 66% of surveyed business owners feel their companies will return to normal business rhythms within a month of the pandemic passing, and 90% feel they should be back to normal operation 1 to 3 months after:

From expert financial institutions to business leaders across the country, we can clearly see that the anticipation of a quick return to normal once the current crisis subsides is not too far away. In essence, this won’t last forever, and we will get back to growth-mode. We’ve got this.

Bottom Line

Lives and businesses are being impacted by the coronavirus, but experts do see a light at the end of the tunnel.  As the economy slows down due to the health crisis, we can take guidance and advice from experts that this too will pass.