Can the rise in coronavirus cases threaten the US housing market?
There was a sudden jump in the sales of the single-family homes in May. But the business activity market remained slightly slow this month, demonstrating that the country’s economy is on the verge of recovering from the impact of the virus attack. The challenge is the increasing infection rates in the nation could pose a threat to the early signs of recovery, as reflected in the new economic data. Some perceive the rise in Covid-19 cases as the consequence of opening the economy too soon. While this can be one reason, there have been signs of regaining economic stability after companies started operating with the relaxation in social distancing and lockdown norms.
According to the senior economists, the resurgence in the infection rate in the South and also the West can be the troublemaker shortly; still, the chances of implementing lockdowns due to the second wave is near impossible. The COVID-19 spread can have a moderate economic impact in terms of recovery. But they don’t think this can lead to a new recession.
New home sales and others
The Commerce Department says that there has been a 16.6% increase in new home sales compared to the last month, giving a glimpse into the housing market’s performance. In April, sales were down by 5.2%. However, the reports reveal that home purchase demand was at its highest as against the last eleven years in mid-June.
In May, the rate of unemployment was also high; almost 20 million people lost their jobs due to the effect of recession from February.
Anyway, the manufacturing and also services industries registered a 46.8% rise in June to 37% in May. The Wall Street market also witnessed gains due to positive and optimistic sentiments. But the prices of the US Treasury and dollar were quite low.
The issue of job losses
The demand for new single-family homes is on the rise due to remarkably low-interest rates and the growing interest of the buyers in private units far off from the city centers as companies ask workers to work from home in this crisis. But with job losses and no fresh hiring in the scene for cost-cutting, it isn’t easy to expect a steep recovery in the housing market.
One of the leading economists at MUFG in New York says that the overall economic slowdown can discourage people from buying an expensive home. A lot of companies have filed for bankruptcy, and also jobless Americans will be less willing to spend money, which could lead to a slower economic rebound.
In the meantime, the current month’s higher sales figures don’t balance out the sales dip in April and May. However, there has been a slight improvement in homebuilding in May after taking a hit a month before. One of the most coveted categories of new homes belonged to prices lower than $200,000, which made up almost 15% of sales. Besides, two-third of the houses sold in the past month were under-construction, or the work had not started yet.
Despite all the bonafide challenges, some experts believe that economy can get its steam as this recession is not the usual type.