May 18, 2020

Homebuilder confidence rebounded by 7 points in May to 37 after having plunged by 42 points in April which was the biggest single-month decline in the history of this series..

NAHB Chairman Dean Mon said that, “The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey.  At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through innovative measures such as social media, virtual tours and online closings.”

NAHB Chief Economist Robert Dietz said “Low interest rates are helping to sustain demand.  As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen. Other indicators that suggest a housing rebound include mortgage application data that has posted four weeks of gains and signs that buyer traffic has improved in housing markets in recent weeks. However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors.”

Traffic through the model homes climbed by 8 points in May to 21 after having declined 43 points in April.  The good news is that traffic picked up in May, although it remains only slightly above the lowesst levels seen in the 2008-09 recession.  But as stimulus checks continue to find their way into consumers’ mailboxes, the stock market continues to climb, and mortgage rates remain low at 3.5%, the interest in purchasing a new home will climb as we  move through the summer and into the fall.

The homebuilders expectations index rose 10 points in May to 46 after having plunged by 39 points to 36 in April.

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As as a result of all this we expect Q2 GDP to decline 60%.  However, as workers return to work gradually beginning next month, GDP will probably begin to climb again by June.  In addition, checks for the $2.0 trillion stimulus plan continue to be disbursed through May.  At the same time the Fed is providing $2.3 trillion of credit to make sure that the credit markets are able to access whatever funds they may require to get the economy back on track.  For this reason, we expect GDP to rebound by 61% in the third quarter.  Once we get to the fourth quarter and into next year, the economy that emerges from recession will not look at all like the economy that went into it.  We believe that technology will continue to help keep the economy growing at about a 5.3% rate in 2021.

Stephen Slifer

NumberNomics

Charleston, SC