As I write this, it is sunny and 55 degrees.  Realtors ordinarily would be calling back customers from the weekend open houses.  The market should be not just brisk but frothy.  In many markets, the inventory of housing has been relatively thin.  Thirty-year rates stand at 3.75%.

Unless you are going to bang on the door yourself and the seller wants to ignore the prevailing social distancing regulations, you cannot see a house except online.  That’s a problem.  Like many other things, the market is frozen.  People with jobs aren’t certain if they can keep them.  Lenders are busy disbursing money to businesses.  So good weather, thin inventory and low interest rates are not going to do sellers much good.  Established builders like Toll Brothers and NVR saw their stock decline by 70% between February 20 and March 23.  Most have recovered somewhat and are trading at about 50% of their February highs.  That tells us the investment community thinks there is life in the market.  However, as with so many issues related to the pandemic, the question is when will it release us from its grip and with what consequent damage to the economy.

Unfortunately, I don’t have an answer for that.  Nevertheless, what the real estate community is suggesting is that when the market resumes, there will be demand that is more cautious and there will be a lot of real estate on the market.  There will be the normal sales that are being held back because there really isn’t a functioning market out there today.  Then there will be the distressed sales caused by illness, job losses and other consequences of the pandemic.  It is also not clear what will come of interest rates.  So far, rates have declined, but borrowing pressure from federal, state and local governments as well as businesses would seem to create competition for lent dollars that was not there a few months ago.  Construction lenders are trapped if they have projects underway.  No one closes on half built property.  Meanwhile, the Wall Street Journal is reporting that virtually all commercial projects where there isn’t already a hole in the ground are being deferred while all of us evaluate how the economy will bounce.

To close with an optimistic reminder. The residential market was in the same place in 2008-09 and at that time, the banking industry was on the ventilator.  Leisure markets like Las Vegas and Florida were reeling as owners of a second home raced to dump their property.  Both of those markets recovered.  Then as now, the question becomes when.

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