July 6 , 2020
First, the good news.
We often look to the housing market as a good indicator of consumer sentiment. Consumer confidence appears to be growing as mortgage applications for single-family homes are on the rise. This certainly may be because of historically low mortgage interest rates. This is not only attractive to existing homeowners, but for those looking to buy their first home, low interest rates provide an opportunity and a strong incentive.
Another reason the housing market appears to be on track for recovery is that surprisingly, consumer disposable income is on the rise. Generally, Americans have been able to save money during the lock down because they have been spending less. This seems counter-intuitive because so many people are out of work. However, for those people who have been able to continue to work, they may have extra money because there is so little to spend it on right now. That means more money available to be set aside for a down payment.
The restaurant industry is starting to recover. It has a long way to go yet, but the trend, at least, is positive.
Overall, employment rates are showing a slight improvement. Looking forward, we expect to see a gradual recovery, but with many ups and downs between now and 2021.
Now, the not so good news…
It appears that some states, in their eagerness to “get back to normal,” have opened back up too soon. As a result, but not surprisingly, COVID-19 cases are on the rise in those states. The lesson to be learned here is that it is perhaps wiser to continue to be cautious and careful before resuming normal activities, because clearly, the pandemic is not over yet.
Retail sales have been particularly choppy. First, there was some improvement. Then in May, they softened again. If virus cases continue to rise and states start to close again, then the outlook for retail sales does not look promising in the immediate future.
So, what can we conclude?
We have seen a significant recovery since we hit bottom at the end of March. While we are not out of the woods yet, we will most likely see a very choppy trend upward, looking forward to 2021, if we can continue, as a country, to take the kinds of precautions that will prevent the pandemic from spreading.
A good way to think about the market is to imagine someone riding the UP escalator while playing with a yo-yo. The day to day moves of the market are the yo-yo, and the underlying, long-term trends of the market, like the escalator, will slowly but steadily rise.
As always, if you have any questions or concerns, please give me a call (201) 618-8818.
CEO, CFP® Wealth Preservation Solutions
Personal Family Office / 360 Wealth Management