On today’s show we’re taking a look at the economic recovery. Some sectors will bounce back, and others will take a long time.
In real estate, we’re seeing some encouraging data during the month of May for several asset classes.
In the broad economy, the US lost about 30 million jobs in March and April. Canada lost about 3 million jobs. But in the month of May we’ve started to see the beginning of a recovery.
The US added about 2.8 million jobs in May, excluding farm employment. Canada added about 290,000 jobs in the same time period. May saw about 10% of the jobs lost in March and April return.
This is encouraging. Frankly, I was expecting that the wave of bankruptcies would create permanent damage to the economy..
Construction registered the strongest improvement among goods-producing industries with an increase of 464,000 jobs, or almost half the number lost in April. Despite the coronavirus shutdowns, house prices continued to rise, and some real-estate brokers and economists say they see signs that demand for new homes has started to rise in recent weeks. In fact, om May, we’ve seen demand for new homes surge 21% compared with the same period last year.
Mortgage applications for home purchases in the week ended May 29 also rose for the seventh straight week, up 5.3% from a week earlier and 17% from a year earlier, according to the Mortgage Bankers Association.
Several real estate brokers I spoke with in the past week are seeing a flurry of activity. One broker said that she sees a busy summer ahead with a large number of new listings coming in the second half of June. It’s as if the traditional Spring market is happening anyway, but just a couple of months delayed.
Those who wanted to move in 2020, are going to move anyway unless they lost their job. Many markets are still experiencing a shortage of supply and rising prices. In my home market, detached homes at the entry level of the market show the lowest inventory. Homes in this category are usually selling on the first day of listing with multiple offers. So far during the pandemic, we’re seeing a 6.1% price increase compared with the same period last year.
Let’s be clear, this is a couple of weeks of data. It doesn’t define a trend. If this is a wave of pent up demand, that wave could subside later in the year. If we have a second wave of the pandemic, we could see a significant slowdown in the fall and winter.