Coronavirus Tracker Update 4/5/20
Location Strategy celebrated its first anniversary on March 1. We spent most of the last year working on MUD studies and feasibility studies for new development projects around the state. Needless to say, our outlook for the year ahead has changed significantly for the year ahead. I've put this together to offer a data-based perspective on the challenges facing our market:

  • Hospitalizations appear far below forecasted. The two most important numbers you should be watching now are fatalities and hospitalizations. The government is holding the hospitalizations number very tightly, so I'll do my best to share them with you. The White House Coronavirus Response Task force appears to be relying on the University of Washington IHME forecast. This is one of the more conservative forecasts with a fatality total around 93,000. This forecast shows 1,958 forecasted hospitalizations on April 2, vs 196 actual hospitalizations according to the COVID tracking project. I have reached out to the CTP to verify this hospitalizations number, but haven't gotten a clear response yet. I have heard from sources at a major hospital system in Houston that their coronavirus numbers have held constant over the last week. This may suggest the model is running ahead of actual numbers or that we may never reach those numbers -- it is early to tell. But it is clear the model is not accurately forecasting the number driving shutdowns. This is also probably good news both for health and for the economy. I'll be looking at this more in depth over the next week
  • Fatalities are going to get much worse. Now that the extreme forecasts of a few weeks ago have been exposed and revised, the fatalities number for the country has settled in around 150,000. That would place the total somewhere around strokes and accidents. Certainly every death is a tragedy, but the media does not stand in front of Methodist Hospital every time someone dies of a stroke. Nevertheless, those totals imply that we have only seen 6% of the expected fatalities and 94% have yet to occur. I have the utmost hope that these numbers are wrong and the deaths are much lower. If they are not, we should prepare for several weeks of extremely bad news - and none of the economic data will solidify until this changes.
  • Cancellations/Pending Sales Drops are Low. Nationally the MBA reports that mortgage applications for new homes are down 24% from 1 year ago - they are only down about 10% from the previous week. We've reviewed the MLS data for new sales, and while this is not a complete dataset for new home sales, cancellations in March were up only about 5% over the average of the last two February/March periods. We also reviewed sales that go under contract in March/April/May - which is about 30% of the sales we complete in a year. This number was also off about 5% versus the last two years. We will continue watching this number, but it certainly was less than I had expected. Most of the cancellations appeared to be over Spring Break, when everything started to be cancelled. Cancellations the following weeks were actually down YOY.
  • People are sitting at home watching homes on TV. Now I know I don't need to tell you the kind of interest 3.25% on a 30-year mortgage generates for home purchases. But did you know in the week ending March 15, 2020 that HGTV was the #5 most viewed cable network, behind the news channels and TBS? I pulled the Google Trend numbers for "new home" in Houston over the last year - it reached its highest point April 1, 2020. Does this overcome a mountain of bad news? Absolutely not. But it would appear that our buyers have not forgotten about us - as someone told me it's a "nugget."
  • An epidemiologist fighting COVID-19 says end the shutdowns now. He believes shutdowns will prolong the outbreak and will only add economic pain to an already terrible crisis.
  • Why we will never know how many people had the coronavirus. A couple of nice pieces in the WSJ and 538.
  • Coronavirus impact could be less than 2008 recession. Here's one look along with some forecasts about reopening.
  • You should probably wear a mask. This study shows masks were more effective than handwashing at reducing virus transmission during SARS in 2003 - which was a coronavirus.

Lastly, I'm still doing webinars if you would like to see my outlook on the market. If you had attended my webinar two weeks ago, you would have known that excessive forecasts would be thrown out, a majority of people with the coronavirus are asymptomatic, cities would start requiring the wearing of masks, why oil was likely to reverse, and that cancellations and pending sales hadn't fallen that much. Let me know if you'd like to schedule something. The webinar covers the national and local economic situation and Location Strategy's current forecast for Houston..

Stay well.

Scott Davis
Location Strategy, LLC
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