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Home » Keep your head, Henny Penny! The sky is NOT falling.

Keep your head, Henny Penny! The sky is NOT falling.

May 26, 2020

Henny Penny book cover

Do you remember the story of Henny Penny? She got hit in the head with an acorn and assumed the sky was falling. She went off and shared this information with a bunch of her friends – and it did NOT end well.

Someone called me yesterday to say they were waiting out the quarantine to buy a home because the real estate market is going to drop like a rock. Their rationale was that there is very high unemployment. Yes, this is painfully true, we do have record unemployment. But the idea that it will lead to a depressed housing market is not true – and here is why.

Chart with the heading: Unemployment Rates and Home Sales Do Not Have a Direct Relationship. Shows that at one point, when unemployment was 7.5%, Existing Home Sales were 3 million; when unemployment was 6%, home sales were over 5 million; when unemployment was 9.6%, home sales were over 4 million (there is also a box which says "#3: Lending standards also tightened significantly after the housing crash"), and when unemployment was a bit more than 4%, home sales were over 5 million

You can see from the chart that, historically, unemployment rates and home sales have no correlation. Additionally, you need to think about who is hardest hit by the current crisis.

Breakdown of U.S. Bureau of Labor Statistics - April 3, 2020 Unemployment Report - Accomodation industry: 4.1%; Retail Trade (stores): 6.6%; Temporary help services: 7.1%; Child Day Care workers: 2.7%; Health care office workers: 6.1%; Construction workers: 4.1%; Food services and drinking places (servers and bartenders): 59.5%; Other: 9.8%

The majority of those unemployed now are not, generally speaking, homebuyers. Their employment status will have little effect on the number of homes sold – pre, during or post pandemic/quarantine.

Finally, this situation will not last forever. The majority of those who are unemployed will go back to work.

Breakdown of U.S. Bureau of Labor Statistics 5/8/2020: Unemployment Report Covering Up Until 4/12. 85.3% are Employed, 14.7% are Unemployed. 90% is Temporary, 10% is Permanent.

So, I say – knock it off, Naysayers! Yes, an acorn to the head hurts, but it doesn’t mean the sky is falling. In fact, the number of homes going under contract in our market (and nationally) is up, week over week https://www.the-welcome-home-team.com/wp-content/uploads/2020/05/COVID19_Bergen-Market-Update3.jpg. But that’s a story for another day…

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297 Kinderkamack Road
Oradell, NJ 07649

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