Promising Vaccine News Impacts Markets

Today we are more than two months into the stay-at-home order that Governor Newsom put in place for the state of California. As we all know, the initial effects of these stay-at-home orders that had to be implemented across the country caused the stock market to be negatively impacted by a substantial amount. The initial unemployment numbers have shattered records, and the economic activity numbers have dropped significantly.

While the pandemic is affecting the state, the country, and the world, at a local level its effects are still an unknown as it pertains to real estate. The overall number of sales for the Sacramento region have dropped significantly when compared to this same time in 2019. Yet buyer activity continues to outpace seller activity even though it has been more than two months since the stay-at-home orders went into place. The question I’m most interested in is whether or not the buyer-side enthusiasm can maintain its momentum. The continued lack of supply is now paired with remarkably low interest rates on home mortgages. My advice to any sellers currently on the fence would be to take advantage of these two factors and get your property listed for sale.

Today the stock market improved significantly thanks in large part to news that a potential vaccine by Moderna is the latest to show promise against the virus. The Dow Jones Industrial Average increased by over 900 points, or 3.9%. The S&P gained 3.2% today and the NASDAQ improved by 2.4% as well. In short, the stock market experienced its best day in over a month. Another catalyst to today’s stock rally were comments by the Federal Reserve Chairman Jerome Powell who said in a 60 Minutes interview that “there’s a lot more we can do” to help the economy.

And yet there are more than 36 million unemployed in the country, which sits in stark contrast to the positive numbers the stock market experienced today. The question remains as to whether our economy will experience a V shaped recovery or a U shaped recovery. When I see such sharp improvements in the stock market based on a relatively small amount of news it makes me hopeful for a V shaped recovery. It also makes me hopeful that the recovery will be experienced by all, not just a few. Additionally, it makes me wonder what we will experience in our local real estate market moving forward. If the broader economy can improve rapidly, and it does so before property values have experienced any significant decreases, does that indicate that we’re just in a real estate lull which is on the verge of rapid appreciation once the coronavirus vaccine is found?

I’m hesitant to predict that because the consequences of such high unemployment have not yet been fully realized. Nor have the consequences of local economies having to shut down for 2 months been fully realized. I think those two factors together are likely to have a significant impact on real estate values, but I will admit that there is nothing certain about the current real estate environment. My advice for buyers is that it is currently difficult to determine what is the best move as it pertains to acting now or waiting. The current interest rates are so low that it definitely makes it hard to wait. But for sellers, I think the future unknowns at this time are a risk that is best to avoid if possible. If you already know that you’re going to want to sell in the following months, then I suggest you start the process sooner rather than later.

~ Mark A. Delgado