Pandemic, Election, and the Economy

Pandemic, Election, and the Economy oh my!!

In April, I wrote about the pandemic and the national and local real estate markets. The report at that time focused on 2019 and Q1, 2020.

I shared comments and opinions (personal and referenced) regarding the state of the national, state, and local economies and how each may be affected as we move through the year. Let us look at what has happened since that report. The following information will cover the middle six months of this year i.e. Q2 and Q3, 2020.

Nationally-

Between March 19th and April 6th, Forty-One States had issued a Stay Safe, Stay Home, Stay Healthy policy. On June 13, 2020 POTUS Trump issued a National State of Emergency which gave him the tools necessary to support the needs of various states as well as local and national economy.

Fairly immediately, we did something that was unprecedented which was to start pumping $2 Trillion into the US economy. I say unprecedented due to the speed the POTUS moved on the situation at hand. While we have done this prior it was always too late (thinking of the great depression and recession) helping create disaster prior to recovery.

The major concerns outlined at that time were: 1. National and Worldwide Debt Crisis (massive deft defaults) 2. High Inflation – Loss of purchasing power 3. Higher interest rates 4. Extreme and Persistent Unemployment Currently-

1. National and Worldwide Debt Crisis (massive deft defaults) a. It is too soon to predict if a Debt Crisis will occur and to what the impact will be.

2. High Inflation – Loss of purchasing power a. The flow of goods and services has certainly been disrupted however inflation remains at only 1.3% nationally as of August 2020. Or is it? In a Wall Street Journal Article dated

September 26th James MacIntosh wrote “The laws of supply and demand explain the divide in inflation between the stuff we want and the stuff we don’t. The outlook for inflation is divided too, between the obvious inflationary pressures and the obvious deflationary pressures, due to overall supply and demand.”

He continues in his article that stuff we want is up. For example sitting at home on Zoom in our pajamas the need a new suit or dress (down 17%), makeup (down 3%), hotel room (down 13%) or air ticket (down 23%) are at a recessionary level. Yet our pajamas (men’s nightwear is up 4%), cycling (bikes up 6%), reading for pleasure (books up 4%, newspapers up 5%) and making things (sewing machines and fabric up 9%, cameras up 4%). Medical care is in demand (up 5%), while higher education is much less attractive (tuition fees up 1.3%, the lowest since data started in the late 1970s).

John L. Scott Real Estate Columbia Basin Region

Pandemic, Election, and the Economy (con’t.)

3. Higher interest rates a. Mortgage interest rates since March 16, 2020 have fallen dramatically as indicated by the table below. Date Average 30-year Fixed APR Average 15-year Fixed APR Average 5/1 ARM APR Oct. 23, 2020 2.961% 2.563% 2.939% March 16, 2020 3.901% 3.299% 3.421%

Source: NerdWallet

4. Extreme and Persistent Unemployment a. The national unemployment rate rose from 3.5 percent in February to 4.4 percent in March. b. Total nonfarm payroll employment rose by 661,000 in September, and the unemployment rate declined to 7.9 percent, the U.S. Bureau of Labor Statistics reported today (Oct 2, 2020)

January February March April May June July August 2020 3.6 3.5 4.4 14.7 13.3 11.1 10.2 8.4 National Unemployment Rates | 2008 – 2019 Reported by Bureau of Labor Statistics Sept. 7.9

The down 46.3% in five months. This is an amazing statistic. Many businesses are reporting that it is higher than should be as many employees are not returning to work when called.

Oregon and Washington

Oregon 1. State and Regional Debt Crisis a. “In August, Oregon lawmakers held a special session to close the then-predicted $1 billion shortfall in the state budget. But, with the new revenue forecast Oregon could end the current two-year budget with a $1.7 billion “cushion.” Reported KTVZ News on September 23rd. b. The same day the Oregon Office of Economic Analysis reported “The economy remains in a Great Recession-sized hole. The strong economic growth of recent months is encouraging.

However, it usually takes a year or two for recessionary shock to work through the economy. I will let you decide by reading the official report linked below. https://oregoneconomicanalysis.com/2020/09/23/oregon-economic-and-revenue-forecastseptember-2020/

John L. Scott Real Estate Columbia Basin Region

Pandemic, Election, and the Economy (con’t.)

2. High Inflation – Loss of purchasing power a. I will explain this as it pertains to Real Estate in the Local Section of my comments.

3. Higher interest rates a. Please refer to #3 above under National and Worldwide Section.

4. Extreme and Persistent Unemployment

Oregon 2020 April May June July August

Unemployment 14.9 14.3 11.6 10.4 8.5 National Unemployment Rates | 2008 – 2019 Reported by Bureau of Labor Statistics September 8.0

Washington 1. State and Regional Debt Crisis a. State spending has increased 70% under Inslee. And we are borrowing close to our limit. Washington has the eighth-highest public debt per capita in the nation. “Spokesman Review” b. Commerce Director Lisa Brown said in a press release. “The depth and complexity of the challenge we’re dealing with demands that we use data in new ways to help every family, every community and every industry get back on their feet, stronger and more resilient than before.” The public “Economic Recovery Dashboard” the agency has created online at https:// www.commerce.wa.gov/datadashboard c. I will refrain from further comments here and refer to the public dashboard above.

2. High Inflation – Loss of purchasing power a. I will explain this as it pertains to Real Estate in the Local Section of my comments.

3. Higher interest rates a. Please refer to #3 above under National and Worldwide Section.

4. Extreme and Persistent Unemployment

Washington 2020 Unemployment April 16.3 May 15.1 June 10 July 10.2 August 8.5 September 7.8

John L. Scott Real Estate Columbia Basin Region

Pandemic, Election, and the Economy (con’t.)

Columbia Basin Region of Oregon and Washington

When I wrote about our local economy is April, we were receiving stimulus checks, wondering what the pandemic would bring to our local region. My comments were summarized in the following statement.

“Finally, we may risk a dinner out or some other purchases, but we are probably not getting on an airplane to visit relatives on the east coast. Therefore, of all the sectors to start moving us forward in the Columbia Basin Region it would be housing.”

I explained why as follows: 1. Our buyers are staying with us during this time where new construction is halted. 2. Our buyers are staying with us on resale of homes for upsizing or downsizing. 3. Listing activity continues as people have opportunities with low interest rates to take advantages of their homeownership goals. 4. Interest Rates are the lowest they have been since the 1930’s 5. Backlog of buyers and little supply. Let me give you some examples.

I gave some examples at that time but allow me to bring you up to date with information drawn from between April 1 thru September 30, 2020.

Columbia Basin Region

We are now an essential business in all areas and open for business.

Our four offices; include Hermiston and Milton-Freewater, Oregon as well as the Tri-Cities and Walla Walla, Washington, have recovered nicely as our clients on for both new construction and in the resale market did stick with us as referenced in #1 & 2 above. This evidenced that we averaged approximately 25 transactions per month in Q1, in April we have 11 Transactions and in Q3 we averaged 30 transactions per month.

The number of listing opportunities has fallen but with continued to low interest rates we see unprecedented demand. Therefore, it is a sellers’ market.

For specifics, by region or office please take a look at the following pages.