Houston Coronavirus Tracker Update 8/01/20



ARE YOU GETTING READY FOR BUSINESS PLANNING? CLICK HERE TO EMAIL FOR INFORMATION ABOUT LOCATION STRATEGY'S BUSINESS PLANNING PACKAGE. OUR PACKAGE INCLUDES INFORMATION ON NEW HOME SALES, LOT DEVELOPMENT AND FORECASTS FOR SALES AND JOB GROWTH, ALONG WITH ALL OF THE OTHER ECONOMIC INFORMATION YOU'LL NEED FOR YOUR PLAN AT A VERY REASONABLE PRICE.
HOSPITALIZATIONS. The patterns we discussed last week are more clear now, with hospitalizations having peaked in the ICU and general beds. The most reliable indicator is what you see on the chart below, and if you'd like to monitor them yourself, you can follow the SETRAC dashboard.
  Looking at Lockdowns Again.  There are a lot of studies that purport to show the effectiveness of lockdowns, but almost all of them are based on models. This article isn't an academic study, but looked at the number of restrictions vs. the virus death rate, and grouped states into high and low categories of each. As you can see below, it's not clear that these restrictions have had an effect on death rates:
HISTORIC GDP DECLINE. So I guess last week's sentiment that most of the economic news was good may have been a little premature. The official second quarter GDP estimate was released and showed a 33% decline. Of course, it wasn't really 33% - it was about 8.5% but the number you're seeing quoted is annualized. What you're not seeing discussed is about 9.5 percentage points of the decline came from heath care. About one-third of the GDP decline caused by the shutdowns came out of health care - the very sector the strategy was designed to protect.
UNEMPLOYMENT IS PERSISTENTLY HIGH. New jobless claims are down, but remain persistently high.
MORE RENTAL CHALLENGES. The expiration of eviction moratoria has left large numbers multifamily tenants at risk of eviction - it's 48% in Texas. The potential problem here are damage to buyer credit, and evictions mean vacancies, which cause rents to decline changing apartment competitiveness with new home sales.
RATES TO STAY LOW FOR A LONG TIME. In the good news area, rates are likely to stay low for a long time as the Fed waits for conditions conducive to raising them.
JOB LOSSES CONCENTRATED AT THE LOWER END OF THE WAGE SCALE. The graph of the Phillips curve show that average wages have jumped; this is because the losses have been concentrated at the low end of the scale, bumping up the average.
CORONAVIRUS APPEARS TO BE IN DECLINE. The graph of 7-day moving averages of cases appears to have peaked late last week - and deaths should follow, peaking somewhere around August 15-20.
MONTH END HOME MARKET UPDATE

  • July ended outperforming last year as expected.

  • Although July sales ended up higher than 2019, it took a dip on the last week - precisely as we predicted based on policy announcements, namely school closures.

  • Average closing price still stable on a rising pattern.

  • Pending sales stayed strong with more than 3300.
New home contract terminations jumped in July, rising above last year's levels, just as we predicted following the policy announcements about school openings. Lets just hope August will improve.
Meanwhile, home rentals are starting to decline versus last year - might this be a function of low rates fueling home sales.
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.
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Sincerely,

Scott Davis
Location Strategy, LLC
832.304.3478