Coronavirus Will Cause Our Next Recession

  • 79
  • 11
  • 4
  •  
  •  
  •  
  •  
  •   
  •  
    94
    Shares
Frederick E Rossiter
Latest posts by Frederick E Rossiter (see all)

Coronavirus Will Cause Our Next Recession - A Black Swan has AppearedA Black Swan has Appeared – Coronavirus will cause Our Next Recession

In a previous post entitled The Black Swan published in August, 2019, I wrote,

“though more common now, especially in Australia, Europe, and Asia, black swans (Cygnus atratus) were once thought to be almost extinct… so rare that a sighting of one was considered to be an unexpected, improbable event.

Today, The Black Swan is a metaphor for an unpredictable, unforeseen, random event, typically one with extreme consequences. Today’s best technology cannot predict their cause or emergence. The only thing we know for certain is that someday, somewhere, another Black Swan will appear.”

And just 6 months after I wrote that article …

A Black Swan has appeared – the Coronavirus:

The Coronavirus and the pandemic it may cause is, without a doubt, a Black Swan… so rare as to qualify as the unexpected, improbable event previously defined. And by definition, it is predicted to have extreme consequences. Our latest Black Swan triggered the precipitous drop in the markets around the world and, in my opinion, our next recession.

I think history will someday show that this recession started in the third week of February, 2020 as evidenced by the 12.4% drop in the DOW. I hope the crashing stock market and all the markets recover, that it was a temporary drop with a quick recovery, that I am dead wrong and that I will have to “eat crow” for the rest of my life like so many other prognosticators.

Recession – Definition:

The economic cycle has four stages: expansion, peak, contraction, and trough. If the contraction is severe or the trough prolonged, a recession may follow.

A recession is generally defined as two back-to-back quarters of negative economic growth, usually measured by gross domestic product (GDP) — that is, the total value of final goods and services produced within a certain period (in this case, usually a quarter of a year).

Influenza Pandemics from the past 100 years:

NameYearStrainOriginDeaths
Spanish flu1918-1920 H1N1China40-50 million deaths
Asian flu1957-1958H2N2China1-2 million deaths
Hong Kong flu1968-1970H3N3China500,000 – 2 million deaths
Swine flu2009-2010H1N1MexicoUp to 575,000 deaths

Source: Reviewing the History of Pandemic Influenza: Understanding Patterns of Emergence and Transmission 2016 Dec, 6, Patrick R. Saunders-Hastings* and Daniel Krewski, Lawrence S. Young, Academic Editor

Is the Real Estate Market going to recede?

Given the likelihood of the Coronavirus reaching pandemic proportions and the disruptions it would cause in the workforce, it would seem most all industries, including real estate, will be negatively affected. I expect the real estate market to recede. Demand will fall and supply will increase. Values will decline. How much? Who knows?

Do Pandemics cause recessions?

Yes – MarketWatch: If the coronavirus isn’t contained, a severe global recession is almost certain

Maybe – Vox: Will coronavirus cause a global recession? We still don’t know.

Yes – AXIOS: The growing coronavirus recession threat

Maybe – The Conversation: Stocks are plummeting – could coronavirus cause a recession?

So, the jury is still out. Many say “yes”, a pandemic can cause a recession; some say “maybe” but most say a pandemic “could” cause a recession.

The Good News:

The impact to economies from pandemics is usually short lived. A vaccine is usually developed to halt their spread or they run their course. The four previous pandemics had lifespans of from 1 to 2 years. Today’s technologies allow us to develop vaccines more rapidly. Perhaps the rapid development of an effective vaccine will prevent the US from suffering back to back quarters of negative growth. I hope so.

Shortages in inventories may temper any recession in Colorado. Colorado did not suffer the severe downturn that other states did in The Great Recession (Real Estate Depression beginning in 2007).

Has the next recession started? I say, yes.

What say you?

Frederick E Rossiter

Frederick E Rossiter

Fred Rossiter has spent the last 46 years of his life in the real estate industry as a State Certified Appraiser and Licensed Real Estate Broker, a custom home builder, investor and homeowner. Fred served as a Special Magistrate for the Lee County Value Adjustment Board for 6 years and is a Certified Collateral Valuation Specialist. He is a commercially licensed, instrument rated pilot and a USCG licensed Captain. Fred has served as a President and Director of two homeowner associations, built a community park and saved 40 acres of land from development for use as a wildlife preserve. Fred loves people, his family, real estate and the outdoors.

You may also like...

20 Responses

  1. Avatar Garth says:

    First: I hope you eat crow the rest of your life: LOL

    Real Estate: In this area & per the News: there are long-lines waiting for cheapER & affordable housing.

    DOM: 0 in many many cases per areas of the city. Also: Inventory is so LOW for first time ownership or just below “median percentages” (Fact- specific) agents indicate >20 offers in 12 hours, @ 32 in 24 hours is becoming the “norm’. Analysis of “time-change” for changes in appreciation is performed “daily”. Meaning, comp’ use over 60 + – days (area specific) may require use of: rapid, increasing, & word: stable needs explaining.

    This area over the future year or two (timeline Thread-Post 1-2 years) I do not foresee future impact severity, as you indicated based purely on limited inventory. ( Area: state border-line SC-NC)

    What I DO dread is when the bubble bursts …when inventory becomes abundant & any foreseeable equity …poof !

    On a side thought: let us all pray or hope a CURE for The Black Swan comes swiftly.

    4
    • Baggins Baggins says:

      Yesterday I was drinking some water and it went down the wrong pipe. I coughed so hard that people around me though I had coronavirus, and for a moment, I thought so too.

      Things are happening man, this is big. Wait and see. I dropped 2k at costco.

      2
    • Avatar Bill Johnson says:

      I 100% agree Garth. I’m working on a 1.5 million dollar property that backs to (same / similar elevation) a busy freeway (56) with multiple bids, just completed a Tidewater where the value was off by $50,000 (in contract site unseen), and just completed a search where there were 72 like sales over the past 12 months with zero active listings.

      My market could slow down by 500% and still not be healthy.

      Seek the truth.

      2
    • Avatar Bill Johnson says:

      Here you go Garth. Zip code 92128, sf of 3,179, non-age restricted, and within 3.25 miles of the subject. Results, 72 closed sales in the past 12 months and there are NO ACTIVE LISTINGS. Take away the GLA variance, and you have another 308 sales. The good news, without the GLA variance there are 12 active listings. In total you have 380 sales (12 months) with 12 listings.

      If one wants a healthy 6 month supply of homes (180), then 12 is a far cry from healthy.

      Seek the truth.

      1
  2. Matt McCormick on Facebook Matt McCormick on Facebook says:

    Speculation is fun.

    2
  3. Ross Grannan on Facebook Ross Grannan on Facebook says:

    Let’s call it chaos, that’s been going for a while now

    2
    • Baggins Baggins says:

      Supply chain disruptions are only getting started. There is a lot of feelgood news out there but the truth is that nobody knows, the data for analyzing these issues is not even in yet. Add in x factors like possible school closures, actual transmission, infection, and death rates here in the US, and you get a better picture that nobody really knows. Much of the real property markets will be dependent on things we don’t know yet. Issues such as if lenders and utility providers will provide relief of payments or not. The virus is encapsulated in a non water soluble fat lipid. That’s why soap and water and lysol are so effective, got to break past the lipid so it dies on whatever surface it rests. Can survive a week on any surface so focus on cleaning and strict hygiene for now.

      2
  4. Tom Markoski on Facebook Tom Markoski on Facebook says:

    Love the realtor spin…As the virus is just getting started.

    2
  5. Vincent Simon on Facebook Vincent Simon on Facebook says:

    Yes they have, and they ROCK. Black Swan.

    2
  6. Avatar SB says:

    The Appraiser Recession that started 12 years ago has NEVER ended.

    CORelogic = CORonavirus

    7
  7. I’m not in the Chicken Little Camp, HOWEVER, there are some troubling signs. I have a good friend that is a truck driver in the combined Ports of Los Angeles/Long Beach.

    Their work volume has slowed tremendously. He says there is serious talk of shutting down the ports-either intermittently or for a set time. Is probable? I hope not. Is it possible? Yes.

    1
    • Avatar don says:

      They went down to Tijuana last time, or was that a union strike? Are we making friends with the Mexicans or will they be too sick? What will that do to to immigration enforcement?

      What can personalities with vivid imaginations do but exaggerate and make worse!

      The Ports of entry are very important, They make make the Marines from Washington State take over, Washington State has had its viruses

      1
  8. Avatar Jack Of All Trades says:

    Coronavirus scare could result with more store bought products reading “Made In America” instead of “Made In China”

    3
    • Baggins Baggins says:

      The moment when you realize, you’ve seen that symbol before.

      0
      • Avatar Jack Of All Trades says:

        Walmart used to do that with bicycles. They would get them from china thru Mexico, bring them into Texas or Tennessee, cross dock them from the shipping containers and put them in boxes said made in USA. Then put them on a trailer for delivery.. sure, the box was made in the USA

        0
  9. Retired Appraiser Retired Appraiser says:

    Opportunity Knocks

    Airline stocks (ones that can avoid bankruptcy)
    Cruise Ship stocks (ones that can avoid bankruptcy)
    WYNN (which owns several casinos in the largest gambling area of the world, Macau)

    Shorting stocks like APT & LAKE (manufacturers of masks & biohazard suits) which are absurdly high at this time.

    I believe we are just seeing the tip of the collapse in the US markets however. The current 11% pullback is a mild correction and does not show the full extent of what we are in for. Sit tight and watch for better pricing.

    When life hands you a lemon make lemonade.

    0
    • Retired Appraiser Retired Appraiser says:

      P.S. Shorting APT & LAKE are very long term plays and not for the faint of heart. You’ll have to be willing to wait out the end of the Corona virus which may take over 12 months. In the end you’ll be rewarded with a 60% gain for your patience.

      0

Leave a Reply

Your email address will not be published. Required fields are marked *

xml sitemap

Coronavirus Will Cause Our Next Recession

by Frederick E Rossiter time to read: 3 min