In this keynote address, Dr. Mark Dotzour focuses his comments on analyzing the economy in light of the coronavirus crisis as it relates to investing in residential real estate. As he says, “the best thing you can do as an average person is buy a house in your neighborhood.”
As a business consultant, Mark avoids national media. Instead, he stays informed by focusing on the Wall Street Journal and talking to clients. Mark describes what has happened in the big picture since coronavirus hit the United States: First, our medical system went and then our personal freedoms. After that, businesses started to suffer and then the bond market froze up. Next, the stock market took a dive. Finally, supplies chains started hurting and state and local governments began hurting as well. The current state of the stock market means nothing about the health of the economy.
Watch the video here
Here is the full keynote. You can watch it on my YouTube channel if you prefer.
Mark gives his perspective on the big-picture, long-term recovery to help you make good business decisions. He comments that we can’t predict whether the recovery will be v-shaped or Nike-swoosh-shaped because it will be different for every community based on their job base. Mark believes that recovery will be gradual and makes a few predictions:
- Businesses will be hesitant to hire as they wonder if businesses will shut down again in December
- People may start moving to suburbs
- Mortgage rates may go down as the government tries to jump start the housing market
- It will be difficult for convention cities, cities with big airports, and cities invested in oil and gas
Mark also discusses the connection between a recession and a “debt jubilee,” in which every 50 years or so, all debts are forgiven and land is given back to its owners. The government wants to avoid a debt jubilee because it needs a strong economy to back federal debt and if a jubilee happens, the economy will fold. Mark comments on inflation, when he will begin to worry about the federal debt, and the value of the US dollar.
The good news is that the strongest sector currently is the housing market. This is good news because the housing market leads the economy out of a recession. Mark comments on the prices of homes, saying that he thinks prices could drop up to 10% in the top third of the housing market while prices in the bottom third will probably go up and mortgage rates will go to 2.5%.
When it comes to investing in residential real estate, Mark believes that the demand for single family homes will continue to grow as will small cities. Mortgage rates may stay low as the feds try to avoid a debt jubilee.
Regardless of the uncertainty of whether or not things shut down again in the winter, if the helicopter money isn’t enough, how many people will file for bankruptcy, and so much more, Mark is sure of one thing: Americans don’t tolerate delayed gratification and they will go back to work and will start spending money again. Either we will conquer the virus or get used to it and go back to doing what Americans used to do.
You can access the full three hour recording here.