Houston Coronavirus Tracker Update 7/18/20
HOSPITALIZATIONS. With testing running 7-10 days for returned results, I'm hesitant to rely on any case number data - I just don't think it's very reliable. However, positive news on the hospital front:
  • ICU usage for Houston MSA counties appears to have stabilized without having exceeded capacity, with COVID patients declining three days in a row.
  • General hospital bed usage increased - but this is coming from other patients: COVID patients have declined four days in a row.

We will have to see if these represent a change in trend or a quirk in reporting of the numbers; most of the research on intervention shows measures having an effect on cases in 7-10 days, but I think given the backlog in testing we would expect them to take a much longer time to take effect on case numbers. Additionally deaths are a lagging indicator; it takes about 3-5 weeks for a patient to succumb to the coronavirus if their infection proves fatal. Thus, when we see a change in trend it will be in hospitalizations. If you'd like to monitor them yourself, you can follow the SETRAC dashboard.
JOB APPLICATIONS: HOUSTON IS NUMBER 4. Snagajob is a feature of Indeed, a popular recruiting and job search website. They've compiled statistics on the increase in job applications from April to May -- Houston was #4 of the top 50 MSAs at 64%, ahead of Dallas (#13) and San Antonio (#23) and Austin which was not on the list. The high ranking could be a reflection of having taken a harder hit economically, but combined with the strong job growth numbers in May that we discussed last week, I think it's more a sign of optimism and perceived opportunity. We will have to see if this continues in light of the recent spike in infections. Google's mobility index shows last week Harris County had a 42% decline relative to baseline; this is comparable with the week before the original Stay-at-Home (SAH) on March 24. After the SAH order, mobility declines peaked at about 49%, again indicating that the vast majority of social contact reduction came before and not as a result of the SAH order.
CASES VS CLOSINGS: ANOTHER SHUTDOWN?. For this analysis, I'll be using the 7-day moving average of new cases for Houston MSA counties (from Texas DSHS) and new home closings for 2019 and 2020 from HAR MLS. THe Harris County Stay-At-Home order was issued March 24 (red arrow), which was the first of area counties to do so. The Houston area had its first peak in cases 16 days later on April 9. The moving average of new closings for 2020 (blue) saw a significant (and its only) drop starting on April 30. This puts the decline around 22 days after the first peak and 38 days after the SAH order. Since the average feasibility period on contracts in this period is 28 days, the data suggest that it was the SAH order and not the infections themselves that caused the decline in new sales because there wasn't time between the peak for properties to contract. It is also possible that job losses and lack of confidence related to the virus and economy affected buyer psychology here.

It's hard not to draw the same conclusion looking at sales and the current rise in cases that started around June 12. Here, without shutdowns but rampant growth in new virus cases, sales in 2020 have trended higher than last year - with daily new cases 10x what we saw in the spring.

I don't know that we will see another shutdown - the Governor has said it is unlikely if only because he didn't believe people would follow it - but strictly from the standpoint of impact on sales, shutdowns and related sentiments have had a more significant impact on sales than the actual spread of infection has - evident from the sales behavior over the last 45 days. You'll also note that after the first peak, the SAH had a very limited affect on the number of cases as well. I guess what I would say is someone is going to have to explain to me what would be different under another shutdown before I would expect anything but the same results on cases and closings under version 2.
PSYCHOLOGY OF THE RECOVERED CONSUMER? The charts below come from FEMA's Training Manual for Mental Health and Human Service Workers in Major Disasters . I found it useful for thinking about how people respond and will respond to disasters; if you flooded in Harvey or another storm, you probably will recognize the phases. Early on, when you saw videos of people saluting health care workers for example, was part of the "Heroic" phase. I think the "Honeymoon" phase probably occurred around the protests - which is partly why they were so large and widespread. We are probably now in the "Disillusionment" phase - for instance as it has become evident that we still do not have adequate testing, and no government level has made a credible effort at contact tracing. This is also why the adoption of masks now is so contentious - people are less trusting and amiable when the limits of resources and ability for recovery have been exposed. Adoption would have been much more successful back in the heroic phase when people were doing things like mailing individual N95 masks to hospitals.

Our buyers - whether they have been personally affected by the coronavirus or not will likely have some degree of this mindset and it will affect the way they consider our offerings. They will be looking to buy coming off an emotional low and may even have to consider a smaller or less expensive product than they originally thought. One of the ways that move-down sellers have been successful in avoiding a "letdown" on new product for these buyers is to emphasize moving into a new house as entering a new stage or phase of life and generate excitement around that accomplishment and what for that buyer.
IS THE WORST OVER FOR OIL? The worst effects of the coronavirus on global oil demand have passed but will continue to echo as the market slowly recovers in the second half of 2020 according to a new report by the International Energy Agency.
IS THE WORST OVER FOR OIL, II? 75% of energy executives expect to restore curtailed output in the next three months.
MASK WEARING CORRELATED WITH VIRUS SPREAD. You all know that I've been a strong proponent of masks; my very first issue on April 5 featured a study showing masks were 25% more effective than handwashing at stopping coronaviruses. So if you need convincing or at least a cure for insomnia, here's a list of 70 studies on the effectiveness of masks.
JUNE RETAIL SALES ALMOST TO PRE-CRISIS LEVELS. Nationally retail sales are nearly recovered to pre-crisis levels, and are led by some big ticket items: clothing, electronics and appliances, and furniture.
CLOSED SALES OF NEW HOMES. Although sales last week were flat, they rose slightly compared to this month last year which is again a positive sign. On a weekly basis, the year-over-year comparison was even stronger.
With more data farther into the month, average closing prices are up almost $20,000 for the first two weeks in the month of July.
Pending sales has remained strong with almost 3200 and expected to be remained unchanged until end of this year.
As some businesses beginning to close again because of the outbreak, this maybe the cause of the continuous increase of numbers in home terminations as people lose jobs or are reluctant to make purchasing commitments.
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Stay well.

Scott Davis
Location Strategy, LLC