Coronavirus Tracker Update 6/20/20
WHO REALLY HAS THE COVID? Before covering cases, I wanted to talk briefly about testing and cases. Bear with me a bit because this can get confusing. The swab-PCR test yields about 5% false positives (sensitivity) and as much as 30% false negatives (specificity), which seems to depend largely on the skill of the person using the swab. The graphic below is from the British Medical Journal (my apologies if it's a little blurry, you can find the original interactive here).

We have a positive testing rate of around 8-10%, but Texas does not report negative tests, so we have to estimate some values: here I've used 80% for the pre-test probability (NB: we are ignoring the infection rate at the moment). In this case, for every 100 tests, 56 are positive, 19 are negative, 1 is false positive and 24 are false negative, which means almost one-third of those who have the illness have received a test result indicating no infection.

However, if we adjust the pre-test probability downward to around 10%, effectively reflecting a lower infection rate, our false negatives drop almost to 0 and false positives shoot up to anywhere from 1/3 to 2/3 of the total positive results. This is a common problem with medical testing - for example this very problem led the US to change recommendations for mammograms about a decade ago.
I don't know what the right answer is here and would refer you to testing expert for that. What I do know is:
  • Cases as a result of testing are not a valuable metric for analysis because we don't know how many people have been infected, and we don't really know even how many people who have tested positive or negative have it or not. Hospitalizations are the number to look at.
  • A lot of the new testing capacity coming on line is being spent testing the same people over and over again to clear a negative result, and so additional announced testing capacity doesn't go as far as you might think.
  • Reviewing the stats on cases/million population at worldometer, the states identified as growing cases - Texas (3,646/MM), California (4,325/MM), Florida (4,176/MM), and Georgia (5,840/MM) look very different than states that had extensive infections where we are now seeing declines - New York (21,055/MM), New Jersey (19,302/MM), Massachusetts (15,473/MM) and to some degree Michigan (6,719/MM). You know I've long been skeptical of the effectiveness of the infection control strategy we are using. Let's all hope that the obvious inference drawn from those two sets of numbers is the wrong one.
Given the last item, I'm not showing the cases. Here's the dashboard from TMC - we've dropped again into the red zone on ICU usage and are nearing the surge capacity. That capacity is several hundred beds.
Below are the hospitalizations from SETRAC. They've gone up considerably for ICU and general bed usage, but hopefully will start to level off. They do remain under capacity and under surge capacity for now.
THREE THEORIES. There seem to be three theories as to what is taking place in Houston/Texas with infection spread:

I'll leave you to decide what you think is going on here.
WHAT'S WRONG WITH THIS PICTURE? Now for something a little light-hearted. I saw a sign similar to this one in the Houston area recently although I was unable to take a picture. There's something wrong with the sign. If you know what it is, email me here. I'll send the first three responders Starbucks gift cards. Answer next week.
V IS FOR ECONOMIC RECOVERY. MBA Mortgage Purchase index up significant since April, now ahead of 2018-2019.

As the recovery begins, consumer response looks kind of like a V. Labor not so much yet.
MARKET UPDATES. I think these have gotten to be pretty straightforward, failing some major economic shift. All sales, property and transaction data reported in this section is from HAR MLS, properties marked as new construction homes in Houston MSA counties for Jan 1, 2019 - Jun 17, 2019 and Jan 1, 2020 - Jun 17, 2020.
A big week for closings as we approach mid-year.
Sales up from $200K - $400K, and at $500K-$699K.
Pricing has nearly closed the gap with last June.
Pending new home sales in MLS remain strong with over 3,300 pending transactions. That's up almost 130 contracts since last week.
Terminations back below last June levels. This is a same number of days comparison.
Terminations highest at the low and high end of the market. $200k-$299K buyer is probably most likely to be hurt by economic dislocation. Fortunately that is the widest segment in the market and things are improving which should help at this price point.
ONE SICK PERSON. 350 PASSENGERS. NO ADDITIONAL INFECTIONS. On May 23rd, I shared with you the study from the NEJM from 2003 that formed the basis of changing social distancing from 3' to 6' in the US. It's still 3' in most of the rest of the world. The Canadian Medical Association Journal has recently published a case report of a 350-passenger flight from Wuhan to Toronto. A known symptomatic passenger was on board. Passengers on the 15-hour flight were tested and contact traced. There was not a single passenger aboard the February 2020 flight who was infected. It is unknown but suspected that passengers wee wearing masks. Why is this important? Social distancing - whether by policy or voluntary action of individuals - has arguably had the greatest economic impact of any anti-infection measures, and also has very low-quality scientific support. If it is shown that masks actually are more effective than distancing, then we should support masks over social distancing at every opportunity. This is a question which merits more research.
FINALLY, IT WOULDN'T BE A WEEKLY UPDATE WITHOUT A SEWAGE STORY. Italy's first case of the coronavirus was in Rome in January. The country's National Institute for Health has surveyed WWTP samples from Northern Italy from October 2019 through February 2020 and found evidence of the virus in samples from December 18. Researchers in Barcelona have had similar results finding evidence in samples over 40 days before the first case. I know y'all love these stories, so here's the link.
Are you looking at new deals? Want to understand what's going on in the market today? We're here to help, even if it's just a short conversation.

Stay well.

Scott Davis
Location Strategy, LLC