There’s an overwhelming amount of data and headlines circulating. This column is my attempt to make sense of it all for you, the real estate professional, from an overall economic standpoint.
Over the past few months, you may have heard or read the phrase “high-frequency data.” It’s a really interesting subject that I thought was worthy of exploring with you today.
High-frequency data is exactly that — data that is released more often than many of the economic numbers we rely on that generally come out monthly or, in some cases, quarterly.
The trouble is that monthly or quarterly numbers, though still important, are essentially stale by the time we get them, so many economists have turned their attention to more timely, and sometimes more unique, datasets to show where we are when it comes to a post-COVID-19 economic recovery.
But there’s another reason economists and analysts are concentrating more on high-frequency numbers.
We look at them because the economy was shut down very suddenly, so it’s reasonable to expect that economic growth will resume as quickly, and therefore, waiting until the end of a month to look back on what happened just won’t cut it anymore.
Below, I’ll share some numbers and, hopefully, give you an idea of how close we really are to getting our economy back to normal.
This first chart shows the weekly change in applications for new mortgages. This is a very important leading indicator.
As you can see there was a sharp drop off in applications when COVID-19 hit in March, but the numbers have recovered rather well. In fact, though not shown here, I will tell you that the current index level is up by 20.1 percent versus the same week in 2019.
And this tells me that more buyers are applying for home loans, which suggests that, even if they aren’t active in the market yet, they are getting ready. So, we know that there is demand out there.
(I often get asked if these numbers include refinancing applications, and they do not.)
This next chart looks at the number of people out viewing homes for sale across the country.
As you can see, there were a lot of viewings unusually early this year. But then COVID-19 hit, and the market froze.
After viewings bottomed in mid-April, the trend has been very bullish with viewings at the end of last week up by 51 percent compared to the same day in 2019.
Real demand was never lost, it was just being deferred, and I believe that the summer months will be very busy in the housing sector.
But if I do have a concern, it’s that, though buyers will be out in force, will there be enough sellers?
Listing activity has not yet recovered, as you can clearly see here, but I am hopeful that we will start to see an uptick in the number of homes for sale as the country continues to reopen and we become more confident. And this is actually supported by data on new listings that has started to rise over the past few weeks.
That said, it’s going to remain a tight market across much of the country with more buyers than sellers.
Moving on, weekly unemployment claims are another good indicator of how the economy is faring. Although they are still very high initial claims have been dropping nicely as workers return from furlough, but continuing claims for unemployment benefits have not started to drop, and I won’t be happy until that number starts falling.
Now, I want to share some more unique datasets that I don’t normally track, but because of COVID-19, I have had to start looking at different types of data to see whether we are actually emerging from our homes. And this is important as the U.S. economy relies heavily on consumer spending.
These are numbers from Apple, based on requests for driving directions on people’s phones.
As you can see, there was a massive drop off in the number of people out driving when COVID-19 hit, but it turned around very quickly, and it’s now actually above the level seen at the start of the year — a good sign.
So, it’s clear that we are back in our cars, but not in planes. These numbers are remarkable. Why? Well let’s look at the last day of data which was last Thursday.
On that day 576,514 people took to the skies, but that’s down 79 percent from the same day in 2019 when over 2.7 million of us flew.
This next chart shows hotel occupancy rates, which plummeted in early March, but again, after bottoming out in early April, we are starting to see some modest improvement. But there’s still a long way to go to get back to where we should be.
Along with hotels, the bar and restaurant business has been hit so hard, and these businesses are important as over 14 million people are normally employed in the accommodation and food services sector.
To get an idea as to what’s going on in the restaurant space, let’s look to OpenTable. That’s right, the restaurant reservation company.
Restaurants were shuttered through the end of April but when some markets reopened, you can see reservations started to rise. Reservations are still down by 64 percent compared to the same day a year ago, but I expect the numbers to continue improving.
A word of caution: This shows restaurant reservations in Phoenix, and you can see that when their market reopened a lot of folks headed out to their favorite dining spots, but look at the drop off that started early this month.
What happened? Well, diners weren’t taking appropriate precautions, and because of that, Phoenix saw new infections rise by 313 percent between early May and now and that has driven people back to their homes and reservation activity dropped.
So, there we have it.
High-frequency data can inform us very quickly if we are staying on the right path or if we are veering off the tracks when it comes to an economic recovery.
Most areas across the country are doing the right thing, they are being cautious about reopening, and the residents are respecting the rules of social distancing, mask wearing and the like, but that’s certainly not happening everywhere.
That said, I do see a light at the end of the tunnel, and as these high-frequency datasets have hopefully showed you, we are — albeit slowly — emerging from the impacts of the novel Coronavirus, but we are not out of the woods yet.
I sincerely hope that we will all continue to do our part to slow the spread of the virus, and if we do, the second half of the year to be a significant improvement over the first half.
To get the big picture including all of the data, watch the full video above.
Matthew Gardner is the chief economist for Windermere Real Estate, the second largest regional real estate company in the nation. Listen to him speak at Inman Connect Now.
