The second wave…
G’day all
Happy Friday everyone, hope you have all had a great week!
And that brings us to the end of May, and what looks like the end of most of the lockdown restrictions in Australia as business and the economy slowly starts to move again over the next month or so…
Its good to see things reopening, or at least plans being made to do so – kind of like that light at the end of the tunnel… at least now we can see it getting closer.
The U.S. is in a similar place, albeit nowhere near as successful at curbing the spread of the virus. Being such a consumerism society, I feel they have little choice but to start lightening restrictions, regardless of the cases, pretty much a lose / lose situation. Damned if you do, and damned if you don’t. I do feel that this is not going to reflect well on President Trump’s chances for re-election, so be prepared to see some fancy footwork from the “Pres” now as he tries to recover and divert attention away from the crisis. Look out China…
On that note, there are already some interesting economic data coming in from the US and AU showing quick recovery of housing prices, good auction clearance rates and lower than expected unemployment levels.
I would, however, suggest that the statistics and data we are seeing right now, is not indicative of actual…
First and foremost, for unemployment figures to be accurate, it requires all those “not employed” to register as such for benefits. There are a significant number of people whose employers would be paying Jobkeeper in AU and therefore not need to register as unemployed. Our figure came in last month around 6.9%, up from mid 5’s before the crisis, but the real number is probably around 15%
Same in the US. What will really matter is come September / October, when the stimulus starts to wane, how many jobs are gone, and how many businesses close.
I believe we are likely to see a “second Wave” but not in virus cases, in business and job losses. I also fear that this 2nd wave will be harsh, the initial wave being artificially supported by stimulus packages. Once these are gone, those that are on a knifes edge will crumble. This is where we will see the real impact.
From a housing perspective, for there to be a drop in house prices or market, there needs to be transactions. The volume of transactions in the US particularly, since March, has completely dropped off a cliff. What this will do is as things start to reopen now, demand will return for housing quickly, but with no properties being listed for the past few months, it will take some time for supply to catch up.
So, what do you get if demand is outstripping supply, even for a short time? Growth… But again, I feel this is artificial. The supply of inventory will return and the demand as time goes on will ebb, leaving a gap. Again, how big a gap will depend on that ‘real’ unemployment number in the months to come after the stimulus has gone.
This could almost be the property markets version of a ‘bear trap’ – a term used in stock and commodity markets representing a small rise in pricing, enough to get the average investor thinking prices are rising so they buy… and bang! Prices plummet…
I don’t believe it is as pronounced as this in property, but I would be hesitant paying too much for properties right now. I still would hold firm to my low offers and sit tight, you will start getting deals accepted sooner or later.
Stick to your guns and your investment strategies and watch for that second wave… There will be some great opportunities coming…
You got this!
Happy Investing all and have a great weekend!!
