There’s Still a Struggle Ahead But Signs Emerge that the Economy is Reawakening

The COVID-19 pandemic started to strain the housing market in April, but amid the strain prices are holding firm, according to a new research report.

Data shows that housing starts declined by 30% and building permits dropped by 21%, said the report by JLL.

Existing home sales declined by 18%—ending up at the lowest level since April 2011, said the report.”

Demand for housing may rise, however, because some households want to relocate, according to anecdotal evidence. Inventory is going to be a challenge for home sales: Inventory declined 20% in April, compared to last year. The report called this “an ominous sign during spring, the prime sales season.”

“The lack of available inventory is supporting home prices, which continued to rise in March at the beginning of the downturn,” JLL reported.

Despite the pressures in the housing market, the paper said there are good signs that the US economy is beginning to reawaken. That conclusion was based on data about truck loads, mortgage applications, new business applications, flight bookings, hotel reservations and distances traveled.

“Yet those slight improvements, coupled with the continued shutdown of other components of the economy, suggest further struggles ahead,” wrote contributor Ryan Severino in JLL’s report.

Unemployment claims were 2.4 million for the week ending May 16, which is less than the 2.7 million jobless claims from the prior week.

Unfortunately, there’s a concern growing that job losses may not be temporary, but transform into more durable losses. The economy is reorienting way from goods and services that do not comport with social distancing, explained the report.

The number of people who have already filed for unemployment and continue to receive weekly benefits counted at 25.1 million in the week ending May 9. That is “the highest on record,” the report noted.

For the first time ever, the Fed’s balance sheet grew to assets more than $7 trillion. It’s concerned about both short-term and medium-term risks to the economy. The Fed is likely to keep expanding its balance sheet, and implement more measures to help ease the crisis, the JLL report said.

The report also mentioned that new fiscal stimulus packages seem to be stalling in Congress over a dispute regarding aid to state and local governments.

“State and local governments face shortfalls in funding due to lower taxes, like the federal government, but some are constrained by the requirement to balance their budgets and a limited ability to borrow in the capital markets,” explained the paper.