{"id":167312,"date":"2020-03-25T02:45:08","date_gmt":"2020-03-25T06:45:08","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=167312"},"modified":"2020-03-24T14:16:18","modified_gmt":"2020-03-24T18:16:18","slug":"concerned-about-the-real-estate-market-me-too-part-iii","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/03\/concerned-about-the-real-estate-market-me-too-part-iii\/","title":{"rendered":"Concerned About The Real Estate Market? Me Too \u2013 Part III"},"content":{"rendered":"
March 25, 2020<\/div>
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By TheTechnicalTraders<\/u><\/a> – <\/strong>Our continuing research into the state of the Real Estate market suggests the Covid-19 virus event will likely put extreme pressure on many sectors within the US and global markets.\u00a0 This, Part III of a multi-part research article, will highlight many of the key economic data points that will soon be released and how these numbers may shock the markets.\u00a0 Additionally, as consumers and businesses prepare for an extended shutdown, it is important to understand the psychological process that takes place in the minds of people.\u00a0 PART I<\/a><\/strong>, PART II<\/strong><\/a><\/p>\n

Initially, people naturally hope for a quick and reasonable solution.\u00a0 As the process continues where an extended shutdown of the US economy persists, consumers and business managers change their expectations from optimism for a quick resumption of economic activity to \u201chow do we survive this extended closure event\u201d.\u00a0 This is when traders and investors really need to pay attention to what is happening in their local and national economies.\u00a0\u00a0 One of the most important things to consider throughout an event like this is to watch how your local economy is operating and what is happening with local consumers.\u00a0 This will help you understand what is happening elsewhere.<\/p>\n

Demand for certain items will continue almost as normal.\u00a0 We call this the Personal Consumer Essentials.\u00a0 These items are typically things like toilet paper, toothpaste, over the counter medications, underwear, food, and water.\u00a0 These are the types of purchases that must continue for average people to survive this type of event.\u00a0 Luxury items, vacations, extras, and other purchases may suffer throughout this process.<\/p>\n

The first 30 days will likely be a transition period for many consumers.\u00a0 Remember, this is still the \u201chope\u201d phase where consumers and business managers believe the entire thing will be over in 15 to 20 days and everything will go back to normal.\u00a0 We really need to start to watch how China is engaging in trying to restart their economy and how other nations are dealing with the virus contagion.\u00a0 Maybe the US will regain economic activity faster than other nations \u2013 maybe not.\u00a0 The key to all of this is when consumers and business managers feel confident enough to engage in opportunistic growth investments and purchases \u2013 not just survival purchases.<\/p>\n

Let\u2019s take a look at some of the key economic data that will be presented over the next 15+ days\u2026 But first, be sure to\u00a0opt-in to our free market trend signals<\/strong>\u00a0before closing this page, so you don\u2019t miss our next special report!<\/p>\n

Consumer Spending<\/strong><\/h3>\n

If consumer spending falls below 0.5% for an extended period of time, the largest part of the US GDP calculation will have essentially vanished (consumers).\u00a0 This will result in decreased economic activity, taxes, income and have far-reaching economic complications across the globe.\u00a0 It is our belief that the initial phase of the US shutdown sparked a decent wave of consumer spending for survival supplies.\u00a0 As we move further into this shutdown event, we believe Consumer Spending could easily fall below 0.5% for an extended period of time \u2013 possibly many months.<\/p>

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Source: https:\/\/www.investing.com\/economic-calendar\/real-consumer-spending-914<\/figcaption><\/figure>\n

Jobless Claims<\/strong><\/h3>\n

We expect Jobless claims to skyrocket.\u00a0 We are hearing from local sources that the true number of unemployed in the US as a result of this virus event could be well above 4+ million right now.\u00a0 It will take time for these people to process into the system \u2013 so this will be an interesting number to watch.\u00a0 This number could send a shock-wave throughout the investment community as an extended rise in the jobless claims values would suggest a very deep recession is setting up. \u00a0No jobs, no income, no asset appreciation\u00a0 \u2013 it\u2019s simple.<\/p>\n

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https:\/\/www.investing.com\/economic-calendar\/initial-jobless-claims-294<\/figcaption><\/figure>\n

Personal Income<\/strong><\/p>\n

Personal Income has fallen into severely negative territory only a few times over the past 30+ years.\u00a0 We believe income levels will play an important role in understanding the true scope of this potential economic event and how to plan for a potential Real Estate collapse in the future.\u00a0 If you are following our logic in posting these data points, you\u2019ll quickly understand that Consumer Spending is related to a psychological consumer belief (either opportunistic or survival).\u00a0 This psychological belief is related to having a job and a solid source of income.<\/p>\n

In the past, we\u2019ve often referred to the global economy as a \u201cliving being\u201d operating in a localized environment \u2013 like a plant.\u00a0 Typically, if the environment is healthy and abundant, the plant adopts a \u201cgrowth phase\u201d where it attempts to flower and expand into the environment.\u00a0 If the environment is unhealthy, the plant changes into a \u201csurvival phase\u201d\u00a0 where it attempts to shed unneeded shoots and stems while trying to simply survive the unhealthy environment.\u00a0 The plant can\u2019t get up and walk to a better environment \u2013 it is forced to operate in either of these modes because it has no other choices.<\/p>\n

Within a global event like the Covid-19 virus event, we are like these plants that I\u2019m describing.\u00a0 We can\u2019t pack up and move to a better environment \u2013 we just have to deal with the phases and processes that are taking place within our environment \u2013 hoping to survive enough to be able to grow when the environment gets more healthy.<\/p>\n

If personal income collapses, consumers will shift into a survival mode much quicker.\u00a0 This is similar to the environment turning completely toxic over just a few days.<\/p>\n

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https:\/\/www.investing.com\/economic-calendar\/personal-income-234<\/figcaption><\/figure>\n

Non-Farm Payroll<\/strong><\/h3>\n

Non-Farm Payroll data will also help us understand how toxic the economic environment has become in the US.\u00a0 We purposely included the 2008-09 data on this chart to show you how the payroll data turned negative in late 2007 and early 2008 \u2013 well before the collapse really started to happen.\u00a0 With the Covid-19 event taking place, we believe the process will be much quicker and violent.\u00a0 If the nation-wide shutdown continues for more than 60+ days and\/or the spread of the virus is not under some type of containment within the next 60 to 90+ days, the damage to the jobs market could be extensive.\u00a0 That translates into the Real Estate market as very bearish.<\/p>\n

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https:\/\/www.investing.com\/economic-calendar\/nonfarm-payrolls-227<\/figcaption><\/figure>\n

Mortgage Rates<\/strong><\/h3>\n

Even though the Fed has dropped interest rates, consumers may not be willing to engage in purchasing homes while this Covid-19 virus event continues.\u00a0 Home prices are extremely high compared to historical values.\u00a0 The Case-Shiller home index (below) suggests a move down to the 140~150 level would not be unreasonable \u2013 even with interest rates near ZERO again.<\/p>\n

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https:\/\/www.nerdwallet.com\/blog\/mortgages\/current-interest-rates\/<\/figcaption><\/figure>\n

Case-Shiller National Home Index<\/strong><\/h3>\n

If we are correct and an immediate and rather deep price decline takes place in the US housing market, it will set up a \u201crace to real value\u201d in terms of the market attempting to find what we call the \u201cequilibrium\u201d within the supply\/demand curve.<\/p>\n

A decrease in the Case-Shiller National Home Price Index to levels near 150~160 would represent a nation-wide price collapse of about 25~35% in the housing market.\u00a0 Certain segments of the housing market may fall by even more extreme levels whereas other segments may fall by smaller amounts.<\/p>\n

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We believe the economic reaction related to the Covid-19 virus event will result in a \u201cshock wave\u201d type of collapse as the March 2020 (Q1) data is released in April and May 2020.\u00a0 We believe the revised expectations and continued battle to contain the virus will continue to place extreme pricing pressure on certain asset values.\u00a0 Commercial and Residential real estate is some of the largest price assets anyone could purchase and they\u2019ve experienced a solid 8+ year price advance.\u00a0 It does not seem illogical that a 20% to 30% decline could take place as a result of this Covid-19 virus event.<\/p>\n

When you consider the real process of combating this virus event and the destruction that will take place across the US and the global economy over the next 6 to 12+ months, it is very likely that both commercial and residential real estate will fall from current lofty levels to price levels that are closer to the equilibrium of the supply\/demand curve.<\/p>\n

We also believe that foreclosures will continue to stack up \u2013 even if the banks are told not to process foreclosures for a 12 month period of time.\u00a0 This does not stop the flow of consumers unable to continue their mortgage obligations \u2013 it just stops the banks from engaging in near foreclosure activity for a period of time.\u00a0 The hope is that the markets may settle a bit before banks open the flood gates and start processing these faulty mortgages again.<\/p>\n

In the next, last, portion of this research article, we\u2019ll try to share some predictive analysis that may help you understand where the US stock market may find support and where the US real estate market may find a bottom.<\/p>\n

As a technical analysis and trader since 1997, I have been through a few bull\/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.<\/p>\n

Visit my\u00a0ETF Wealth Building Newsletter<\/strong>\u00a0and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.<\/p>\n

Chris Vermeulen<\/p>\n

TheTechnicalTraders.com<\/u><\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

By TheTechnicalTraders – Our continuing research into the state of the Real Estate market suggests the Covid-19 virus event will likely put extreme pressure on many sectors within the US and global markets.\u00a0 This, Part III of a multi-part research article, will highlight many of the key economic data points that will soon be released […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-167312","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/167312","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=167312"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/167312\/revisions"}],"predecessor-version":[{"id":167313,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/167312\/revisions\/167313"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=167312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=167312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=167312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}