How to Test-Drive a Neighborhood While Sheltering in Place

How to Test-Drive a Neighborhood While Sheltering in Place [INFOGRAPHIC] | Simplifying The Market

How to Test-Drive a Neighborhood While Sheltering in Place [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • Staying at home doesn’t mean your search for a new place needs to come to a standstill.
  • Check out these tips on how to explore other neighborhoods virtually in the homebuying process. You may find a spot that better suits your needs without ever leaving your living room!
  • Let’s connect today so you have help with all of the additional steps along the way, and you’re ready to make your next move.
Content previously posted on Keeping Current Matters

Why the Housing Market Is a Powerful Economic Driver

Why the Housing Market Is a Powerful Economic Driver | Simplifying The Market

With businesses starting to slowly open back up again in some parts of the country, it’s important to understand how housing can have a major impact on the recovery of the U.S. economy. As we’ve mentioned before, buying a home is a driving financial force in this process. Today, many analysts believe one of the first things we’ll be able to safely bring back is the home building sector, creating more jobs and impacting local neighborhoods in a big way. According to Robert Dietz in The Eye on Housing:

 “The pace of new home sales will post significant declines during the second quarter due to the impacts of higher unemployment and shutdown effects of much of the U.S. economy, including elements of the real estate sector in certain markets. However, given the momentum housing construction held at the start of 2020, the housing industry will help lead the economy in the eventual recovery.”

The National Association of Home Builders (NAHB) notes the impact new construction can have on the job market:

“Building 1,000 average single-family homes creates 2,900 full-time jobs and generates $110.96 million in taxes and fees for all levels of government to support police, firefighters and schools, according to NAHB’s National Impact of Home Building and Remodeling report.”

These employment opportunities, along with the home purchase, drive the economy in a major way. The National Association of Realtors (NAR) recently shared a report that notes the full economic impact of home sales. This report summarizes:

“The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance.”

Here’s the breakdown of how the average home sale boosts the economy:Why the Housing Market Is a Powerful Economic Driver | Simplifying The MarketAs noted above in the circle on the right, the impact is almost double when you purchase new construction, given the sheer number of workers it requires to design, build, equip, and finalize the sale of the home. The NAHB paints a clear picture of these roles:

“The NAHB model shows that job creation through housing is broad-based. Building new homes and apartments generates jobs in industries that produce lumber, concrete, lighting fixtures, heating equipment and other products that go into a home remodeling project. Other jobs are generated in the process of transporting, storing and selling these products.
Additional jobs are generated for professionals such as architects, engineers, real estate agents, lawyers and accountants who provide services to home builders, home buyers and remodelers.”

The same NAR report also breaks down the average economic impact by state:Why the Housing Market Is a Powerful Economic Driver | Simplifying The MarketOn an emotional level, what’s most important for today’s consumers to feel confident about is the safety component that goes into the process. Mitigating the risk of essential personnel at this moment in time is more crucial than ever as we all aim to reduce the spread of the coronavirus. Fortunately, the NAHB has put immense effort into a plan that prioritizes the health and safety of home builders and contractors:

“This is why NAHB and construction industry partners have developed a Coronavirus Preparedness and Response Plan specifically tailored to construction job sites. The plan is customizable and covers areas that include manager and worker responsibilities, job site protective measures, cleaning and disinfecting, responding to exposure incidents, and OSHA record-keeping requirements.”

Bottom Line

Buying a home is a substantial economic driver today, and when new construction picks back up again, it will be an even stronger recovery force throughout the country. If you’re in a position to buy a home this year, you can have a significant impact on your local neighborhoods and safely make the move you’ve been waiting for. It’s a win-win.

Content previously posted on Keeping Current Matters

Buying a Home Right Now: Easy? No. Smart? Yes.

Buying a Home Right Now: Easy? No. Smart? Yes. | Simplifying The Market

Through all the volatility in the economy right now, some have put their search for a home on hold, yet others have not. According to ShowingTime, the real estate industry’s leading showing management technology provider, buyers have started to reappear over the last several weeks. In the latest report, they revealed:

“The March ShowingTime Showing Index® recorded the first nationwide drop in showing traffic in eight months as communities responded to COVID-19. Early April data show signs of an upswing, however.”

Why would people be setting appointments to look at prospective homes when the process of purchasing a home has become more difficult with shelter-in-place orders throughout the country?

Here are three reasons for this uptick in activity:

1. Some people need to move. Whether because of a death in the family, a new birth, divorce, financial hardship, or a job transfer, some families need to make a move as quickly as possible.

2. Real estate agents across the country have become very innovative, utilizing technology that allows purchasers to virtually:

  • View homes
  • Meet with mortgage professionals
  • Consult with their agent throughout the process

All of this can happen within the required safety protocols, so real estate professionals are continuing to help families make important moves.

3. Buyers understand that mortgage rates are a key component when determining their monthly mortgage payments. Mortgage interest rates are very close to all-time lows and afford today’s purchaser the opportunity to save tens of thousands of dollars over the lifetime of the loan.

Looking closely at the third reason, we can see that there’s a big difference between purchasing a house last December and purchasing one now (see chart below):Buying a Home Right Now: Easy? No. Smart? Yes. | Simplifying The Market

Bottom Line

Many families have decided not to postpone their plans to purchase a home, even in these difficult times. If you need to make a move, let’s connect today so you have a trusted advisor to safely and professionally guide you through the process.

Content previously posted on Keeping Current Matters

Rise to the Top of the Pool by Selling Your House Today

Rise to the Top of the Pool by Selling Your House Today | Simplifying The Market

With the release of the latest Economic Pulse Flash Survey from the National Association of Realtors (NAR), results show that people selling their houses today are holding strong on price. According to the most recent data, 74% of real estate agents noted that sellers are not dropping listing prices to attract more buyers.

Lawrence Yun, Chief Economist at NAR, noted: 

“The housing market faced an inventory shortage before the pandemic. Given that there are even fewer new listings during the pandemic, home sellers are taking a calm approach and appear unwilling to lower prices to attract buyers during the temporary disruptions to the economy.”

This inventory shortage, which spread widely throughout the housing market going into today’s economic slowdown, created an environment where there were not enough homes for sale for those who wanted to buy them. With that backdrop setting the stage, Yun also notes:

“With the current quarantine recommendations in place, fewer sellers are listing homes, which will limit buyer choices.”

So, with buyer choices already limited going into this season, and more sellers removing listings today, if you’ve been thinking about listing your house, it’s a great time to do so. Many others in your neighborhood may be waiting to make a move or removing their listings, so staying on the market – or jumping into it – could work to your advantage.

Buyers today are serious ones, and with prices holding steady in this low-inventory market, you can feel confident about selling today. Embracing the process virtually, where available, could help your house hit the top of an eager buyer’s list. While your neighbors miss out on this opportunistic time, you don’t have to.

Bottom Line

If buyer choices are limited in your neighborhood, selling now may help your listing rise to the top of the pool. Let’s connect today to make sure you have the expert help you need to succeed in the selling process.

Content previously posted on Keeping Current Matters

What Impact Might COVID-19 Have on Home Values?

What Impact Might COVID-19 Have on Home Values? | Simplifying The Market

A big challenge facing the housing industry is determining what impact the current pandemic may have on home values. Some buyers are hoping for major price reductions because the health crisis is straining the economy.

The price of any item, however, is determined by supply and demand, which is how many items are available in relation to how many consumers want to buy that item.

In residential real estate, the measurement used to decipher that ratio is called months supply of inventory. A normal market would have 6-7 months of inventory. Anything over seven months would be considered a buyers’ market, with downward pressure on prices. Anything under six months would indicate a sellers’ market, which would put upward pressure on prices.

Going into March of this year, the supply stood at three months – a strong seller’s market. While buyer demand has decreased rather dramatically during the pandemic, the number of homes on the market has also decreased. The recently released Existing Home Sales Report from the National Association of Realtors (NAR) revealed we currently have 3.4 months of inventory. This means homes should maintain their value during the pandemic.

This information is consistent with the research completed by John Burns Real Estate Consulting, which recently reported:

“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).”

What are the experts saying?

Here’s a look at what some experts recently reported on the matter:

Ivy Zelman, President, Zelman & Associates

“Supported by our analysis of home price dynamics through cycles and other periods of economic and housing disruption, we expect home price appreciation to decelerate from current levels in 2020, though easily remain in positive territory year over year given the beneficial factors of record-low inventories & a historically-low interest rate environment.”

Freddie Mac

“The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices. Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices. We forecast house prices to fall 0.5 percentage points over the next four quarters. Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand. Price growth accelerates back towards a long-run trend of between 2 and 3% per year.”

Mark Fleming, Chief Economist, First American

“The housing supply remains at historically low levels, so house price growth is likely to slow, but it’s unlikely to go negative.”

Bottom Line

Even though the economy has been placed on pause, it appears home prices will remain steady throughout the pandemic.

Content previously posted on Keeping Current Matters

PARAS NEWS April 24 You Can Support Local Biz Find Out How

The Paras Team shares personal thoughts and tips for coping during the coronavirus pandemic, plus market info and ways to support your local businesses (see list of operating businesses).

Kids in Focus: Mom of Five Shares Ideas & Insight

Whitney Stephens

Whitney Stephens’ family at home during quarantine. Whitney is a mother of five, wife to one, and dog mom to two. She’s a real estate agent who’s been with the Paras Team for three years and couldn’t be happier!

I’m happy to share my thoughts and ideas—I hope they’re helpful! Here’s my “Activities to Do with Kids” list:

  • Let every kid pick a different theme and make the day fun with that theme. Examples could be Hawaiian Day, Disney Day, Superhero Day, etc. Think of fun activities and meals to go along with the theme. You could do this once a week or every day if you’re on spring break.
  • Coordinate with neighbors to do a scavenger hunt. We did a teddy bear scavenger hunt in our neighborhood, and the kids had so much fun decorating the windows with their stuffed animals, then walking around the neighborhood admiring everyone else’s displays! Here’s a website for ideas.
  • Cross E Ranch is doing a drive-through baby animal tour! What a fun way to get out of your house and enjoy the baby animals and springtime!
  • My kids enjoy baking, and we’ve done a lot of that! They pick out the recipe (that uses ingredients we have on hand), help make it, help clean up, and help eat it, of course! We’ve also enjoyed leaving goodies on the doorsteps of neighbors we think might need some cheering up! (Granite Bakery was selling 10 pound bags of flour for $5 last weekend and last I checked!)
  • Sidewalk chalk is always a fun activity, and letting the kids leave positive messages in their own driveways or on their friends’ or families’ driveways is a great way to spread your love!
  • Another activity to spread love and positivity is to decorate your own windows with hearts, or decorate a loved one’s with messages facing the inside of their house to read.
    My kids love movie nights, and we’ve been taking turns choosing them. It’s been fun for me and my husband to share classic favorites with them!

My personal thoughts on keeping kids sane and healthy right now:

This is a time of big feelings for all the kids. They’re missing out on the end-of-year activities they’ve worked so hard for all year: cheerleading competitions, dance recitals, music performances, art shows … the list goes on and on. They want to be in school with their teachers and friends. And it’s a massive, terrible disappointment for all the high school seniors! No graduation, no prom, no signing year books, no saying goodbye.

There’s also much fear and unknown for parents. Most parents are dealing with some sort of pay-cut; there are limited food supplies, earthquakes, and a lot of fear. It’s important to let yourself feel the sadness, fear, and anxiety, but also to see and feel the positivity and love. Your kids will likely mirror your attitude.

Never before and most likely never again will we have the time to spend together like we have these last 5-plus weeks and counting. Get to know each other. Spend quality time together. Catch up on sleep! Make memories. Laugh. Amidst the fear and anxiety, make love win!

We’re protecting our society by staying apart and sacrificing—and there’s something very beautiful in the very thought of that. We’re doing it because the people in our lives are the most important things. We can and will get through this. Until then, enjoy the journey!
P.S. If all else fails, buy a trampoline!

4 Tips for Outdoor Recreation

Cindi Opdycke

Cindi Opdycke and family on a quarantine trip to the Spiral Jetty.

I don’t know about you, but I’m not much of a homebody. Staying inside for long periods of time can be not only bad for my physical health—but also my mental health!
Luckily, we live in a beautiful state with many outdoor spaces to explore. Whether I’m hiking, running, walking, or biking, these are the tips I follow to continue to explore safely:

  • Avoid popular trails. If the parking lot is full, go find somewhere else to go.
  • Stay close to home. We have been advised to stay in our counties so we don’t burden other counties’ resources if we end up getting sick or injured.
  • Give others plenty of space. Be friendly and give people the space they need. Recommendation is 6 feet.
  • Be safe. Don’t make search and rescue come find you! By putting yourself in a dangerous spot, you are not only risking your life, but the lives of others.

Let’s work together to follow these simple guidelines so we can stay sane during these trying times. We’ll get through this!

Outdoor Décor: 4 Small Ideas with Big Impact

Audrey Reynolds

Audrey Reynolds, enjoying quarantine with her chickens.

Best easy tips for freshening up outdoor spaces?

  • Add color! Planters in coordinated colors not only brighten up your space but you get to add greenery! Try planters and plants in varying heights and including edible plants to kill 2 birds with 1 stone!
  • You can add more life and personality to your space with a fun seasonal welcome mat, bee houses, and hummingbird feeders!
  • Check sites like KSL classifieds for outdoor furniture you can upcycle and paint.
  • LED string lights are a great, inexpensive way to add instant warmth and mood lighting!

Personal Note & Market News

Tara Paras

Tara Paras and family enjoying staying home and staying safe together.

We have entered an interesting time in our life, environment, and business. The governor has made us an essential business, because a place to live is a basic necessity. People need a place to live, and many may need to sell.

The real estate market started out strong January 2020 and has continued to do so. We’re seeing more of a stabilization since the first few months of 2020. In Salt Lake County, the inventory is still low comparatively; however, it has begun to equal out in the last month or so in regard to active inventory vs homes with pending contracts.

March 2019, the median days on market was actually higher at 28 days on market, whereas March 2020 the median days on market was at 20 days. The median price per square foot is $149.93 in the valley. This is all relative to many different property features, so ask a real estate specialist to give you a comparative market analysis (valuation) on your unique property for an accurate estimate.

The median sold price is now $340,000, which is up from $305,000 last March. There are less active homes for sale and more pending contracts this March versus last March, which indicates a strong market.

In order to follow the Stay Safe, Stay Home directive, we’re offering virtual tours via FaceTime or Marco Polo and walk-through recordings. Our agents provide gloves, masks, and hand sanitizers during showings and listings.

We’re also asking the COVID-19 questions we’ve been directed to ask by our local MLS and board. As a team, we’ve provided many extra ads and boosts on social media for our listings.

Please contact us with any questions or concerns. We’re here for you not only as your real estate team but also if you need to chat! We’re always here for you!

Sending love to everyone—please stay safe and healthy! XOXO

Restaurants Open for Business

This website has a list of open restaurants in Utah. If your favorites are missing, let them know to get on this list! https://supportutahdining.com/

Golden Pearl
Delicious authentic Chinese takeout with flat noodles and egg rolls to die for!
1625 W 700 N Suite D
Salt Lake City, UT 84116
801-363-5223

Zest
Pick-up for delicious plant-based food
275 S 200 W
Salt Lake City, UT 84101
Zestslc.com
(801) 433-0589

Cannellas Restaurant
Delivering family-style Italian meals through their website
204 E 500 S
Salt Lake City, Utah 84111
https://www.cannellas.com/
(801) 355-8518

Tuscany
Fine Dining for Pick-Up
Lunch M-F Dinner M-S
2832 6200 S
Salt Lake City, UT 84121
tuscanyslc.com
(801) 277-9919

Other Businesses Still Open

Spice Kitchen Incubator (an awesome local nonprofit https://spicekitchenincubator.org/about-us/) has Community Food Boxes for order weekly.
Support your hairstylist by purchasing hair products or gift cards from them.

Barley’s Canine Recreation Center
Dog daycare center, dog sitter, dog trainer
2827 S 2300 E
Salt Lake City, Utah 84109
swimatbarleys.com
(801) 467-6069

Pure Paws
Specialty pet store with high-quality food, supplements, and treats
1927 E Murray Holladay Rd, Holladay, UT 84117
mypurepaws.com
801 996-3259

Hip & Humble
Free local delivery of fashion, décor, gifts, and more
1043 East 900 South, Salt Lake City UT
https://hipandhumble.com/
(801) 467-3130

Mad Snacks Produce
Small year-round farm, delivers hearty greens and other produce
www.madsnacksproduce.com
724-421-4837

Fine Tilth Farm
Fresh produce, curbside pick-up
12820 S Fort Street
Draper, UT 84020
801-971-9647
finetilthfarm@gmail.com

Sugar House Coffee
Drive-up, walk-up coffee shop
2011 South 1100 East SLC, Utah 84106
https://sugarhousecoffee.com/

Alpha Coffee
Take-out coffee and more at the mouth of BCC
7260 Racquet Club Dr
Cottonwood, UT
https://alpha.coffee/

Basecamp Kitchen
Food truck serving breakfast, coffee, and more at the mouth of BCC
3700 E, Fort Union Blvd
Cottonwood Heights, UT 84121
https://www.facebook.com/basecampkitchen/
(503) 338-0994

Vive Juicery
Delivery for vegetables and juices
1597 1100 E, Salt Lake City, UT 84105
www.vivejuicery.com
801-875-8923

Lone Pine Bakery
Cakes, pies, pastries, croissants, and more
834 E 9400 S #58
Sandy, UT 84094
385.237.3556

Babinski Baby
Everything for babies!
1324 S. Foothill Drive
Salt lake City, Utah 84108
https://babinskis.com
801-583-2229

Red Balloon Toy Store
Specialty toy retailer specializing in smart toys
2033 E 3300 S, Salt Lake City, UT 84109
https://www.redballoontoystore.com/
801-467-7232

Cynthia McPhie
Instructor at Corepower Yoga, specializes in high-intensity yoga with or without weights
Instagram @cynniandco for live class schedule Stephanie Willey
Instructor at Rocksteady Bodyworks, specializes in reformer-based workout called BURN
Yoga and mat pilates also available
Instagram @rocksteadybodyworks
rocksteadybodyworks.com

John Paras Furniture
Quality furniture and mattresses, various locations, free local delivery
https://www.johnparas.com/index.html
801-973-7051

Wasatch Pro Painters
Experienced interior and exterior house painting
Wasatchpropainters.com
801.652.4648

Western Garden Centers
Order and pay over the phone; they load your car in the lot
550 600 E Suite #101
Salt Lake City, UT 84102
Westerngardencenters.com
(801) 364-7871

Wasatch Community Gardens
Annual fundraiser and sale online this year
https://wasatchgardens.org/news-and-events/events/item/6-spring-plant-sale

Henrie’s Dry Cleaners 
Utah dry cleaners since 1958, various locations
https://henries.com/
801-359-2271

artÉmotion Summer Intensive
Dance instruction summer program
http://www.artemotion-summerintensive.com
801-403-6468

Oasis Games
275 E. 400 S.
Salt Lake City, UT 84111
http://oasisgamesslc.com/
801-738-4413

Barrus Pianos
Piano moving, service, and sales
2191 S 300 W #6
Salt Lake City, UT 84115
http://barruspianos.com/
801-486-3652

Western Garden Centers
Indoor and outdoor plants
550 600 E Suite #101, Salt Lake City, UT 84102
https://westerngardens.com/
(801) 364-7871

Southeast Market
Great local market, currently doing curb-side pickup
422 900 S, Salt Lake City, UT 84111
https://www.southeastmarket.com/
(801) 363-5474

Today’s Expert Insight on the Housing Market

Today’s Expert Insight on the Housing Market [INFOGRAPHIC] | Simplifying The Market

Today’s Expert Insight on the Housing Market [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • According to Lawrence Yun, Chief Economist at NAR, home prices are forecasted to rise.
  • Results from the Existing Home Sales Report note that home sales declined in March due to the coronavirus, but prices are still strong.
  • Let’s connect so you can better understand your home’s value today.
Content previously posted on Keeping Current Matters

Uncertainty Abounds in the Search for Economic Recovery Timetable

Uncertainty Abounds in the Search for Economic Recovery Timetable | Simplifying The Market

Earlier this week, we discussed how most projections from financial institutions are calling for a quick V-shaped recovery from this economic downturn, and there’s research on previous post-pandemic recoveries to support that expectation.

In addition, we noted how there are some in the business community who believe we may instead be headed for a U-shaped recovery, where the return to previous levels of economic success won’t occur until the middle of next year. Yesterday, Reuters released a poll of U.S. and European economists which revealed that most surveyed are now leaning more toward a U-shaped recovery.

Here are the results of that poll:Uncertainty Abounds in the Search for Economic Recovery Timetable | Simplifying The Market

Why the disparity in thinking among different groups of economic experts?

The current situation makes it extremely difficult to project the future of the economy. Analysts normally look at economic data and compare it to previous slowdowns to create their projections. This situation, however, is anything but normal.

Today, analysts must incorporate data from three different sciences into their recovery equation:

1. Business Science – How has the economy rebounded from similar slowdowns in the past?

2. Health Science – When will COVID-19 be under control? Will there be another flareup of the virus this fall?

3. Social Science – After businesses are fully operational, how long will it take American consumers to return to normal consumption patterns? (Ex: going to the movies, attending a sporting event, or flying).

The challenge of accurately combining the three sciences into a single projection has created uncertainty, and it has led to a wide range of opinions on the timing of the recovery.

Bottom Line

Right now, the vast majority of economists and analysts believe a full recovery will take anywhere from 6-18 months. No one truly knows the exact timetable, but it will be coming.

Content previously posted on Keeping Current Matters

Keys to Selling Your House Virtually

Keys to Selling Your House Virtually | Simplifying The Market

In a recent survey by realtor.com, people thinking about selling their homes indicated they’re generally willing to allow their agent and some potential buyers inside if done under the right conditions. They’re less comfortable, however, hosting an open house. This is understandable, given the health concerns associated with social contact these days. The question is, if you need to sell your house now, what virtual practices should you use to make sure you, your family, and potential buyers stay safe in the process?

In today’s rapidly changing market, it’s more important than ever to make sure you have a digital game plan and an effective online marketing strategy when selling your house. One of the ways your agent can help with this is to make sure your listing photos and virtual tours stand out from the crowd, truly giving buyers a detailed and thorough view of your home.

So, if you’re ready to move forward, virtual practices may help you win big when you’re ready to sell. While abiding by state and local regulations is a top priority, a real estate agent can help make your sale happen. Agents know exactly what today’s buyers need, and how to put the necessary digital steps in place. For example, according to the same survey, when asked to select what technology would be most helpful when deciding on a new home, here’s what today’s homebuyers said, in order of preference:

  • Virtual tour of the home
  • Accurate and detailed listing information
  • Detailed neighborhood information
  • High-quality listing photos
  • Agent-led video chat

After leveraging technology, if you have serious buyers who still want to see your house in person, keep in mind that according to the National Association of Realtors (NAR), there are ways to proceed safely. Here are a few of the guidelines, understanding that the top priority should always be to obey state and local restrictions first:

  • Limit in-person activity
  • Require guests to wash their hands or use an alcohol-based sanitizer
  • Remove shoes or cover with booties
  • Follow CDC guidance on social distancing and wearing face coverings

Getting comfortable with your agent – a true trusted advisor – taking these steps under the new safety standards might be your best plan. This is especially important if you’re in a position where you need to sell your house sooner rather than later.

Nate Johnson, CMO at realtor.com ® notes:

“As real estate agents and consumers seek out ways to safely complete these transactions, we believe that technology will become an even more imperative part of how we search for, buy and sell homes moving forward.”

It sounds like some of these new practices might be here to stay.

Bottom Line

In a new era of life, things are shifting quickly, and virtual strategies for sellers may be a great option. Opening your doors up to digital approaches may be game-changing when it comes to selling your house. Let’s connect so you have a trusted real estate professional to help you safely and effectively navigate through all that’s new when it comes to making your next move.

Content previously posted on Keeping Current Matters

Will This Economic Crisis Have a V, U, or L-Shaped Recovery?

Will This Economic Crisis Have a V, U, or L-Shaped Recovery? | Simplifying The Market

Many American businesses have been put on hold as the country deals with the worst pandemic in over one hundred years. As the states are deciding on the best strategy to slowly and safely reopen, the big question is: how long will it take the economy to fully recover?

Let’s look at the possibilities. Here are the three types of recoveries that follow most economic slowdowns (the definitions are from the financial glossary at Market Business News):

  • V-shaped recovery: an economic period in which the economy experiences a sharp decline. However, it is also a brief period of decline. There is a clear bottom (called a trough by economists) which does not last long. Then there is a strong recovery.
  • U-shaped recovery: when the decline is more gradual, i.e., less severe. The recovery that follows starts off moderately and then picks up speed. The recovery could last 12-24 months.
  • L-shaped recovery: a steep economic decline followed by a long period with no growth. When an economy is in an L-shaped recovery, getting back to where it was before the decline will take years.

What type of recovery will we see this time?

No one can answer this question with one hundred percent certainty. However, most top financial services firms are calling for a V-shaped recovery. Goldman Sachs, Morgan Stanley, Wells Fargo Securities, and JP Morgan have all recently come out with projections that call for GDP to take a deep dive in the first half of the year but have a strong comeback in the second half.Will This Economic Crisis Have a V, U, or L-Shaped Recovery? | Simplifying The Market

Is there any research on recovery following a pandemic?

There have been two extensive studies done that look at how an economy has recovered from a pandemic in the past. Here are the conclusions they reached:

1. John Burns Consulting:

“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices), and some very cutting-edge search engine analysis by our Information Management team showed the current slowdown is playing out similarly thus far.”

2. Harvard Business Review:

“It’s worth looking back at history to place the potential impact path of Covid-19 empirically. In fact, V-shapes monopolize the empirical landscape of prior shocks, including epidemics such as SARS, the 1968 H3N2 (“Hong Kong”) flu, 1958 H2N2 (“Asian”) flu, and 1918 Spanish flu.”

The research says we should experience a V-shaped recovery.

Does everyone agree it will be a ‘V’?

No. Some are concerned that, even when businesses are fully operational, the American public may be reluctant to jump right back in.

As Market Business News explains:

“In a typical V-shaped recovery, there is a huge shift in economic activity after the downturn and the trough. Growing consumer demand and spending drive the massive shift in economic activity.”

If consumer demand and spending do not come back as quickly as most expect it will, we may be heading for a U-shaped recovery.

In a message last Thursday, Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank, agrees with other analysts who are expecting a resurgence in the economy later this year:

“We’re forecasting real economic growth of 30% for the U.S. in the 4th quarter of this year and 6.1% in 2021.”

His projection, however, calls for a U-shaped recovery based on concerns that consumers may not rush back in:

“After the steep plunge and bottoming out, a ‘U-shaped’ recovery should begin as consumer confidence slowly returns.”

Bottom Line

The research indicates the recovery will be V-shaped, and most analysts agree. However, no one knows for sure how quickly Americans will get back to “normal” life. We will have to wait and see as the situation unfolds.

Content previously posted on Keeping Current Matters