Coronavirus Will Cause Our Next Recession
A 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:
| Name | Year | Strain | Origin | Deaths |
| Spanish flu | 1918-1920 | H1N1 | China | 40-50 million deaths |
| Asian flu | 1957-1958 | H2N2 | China | 1-2 million deaths |
| Hong Kong flu | 1968-1970 | H3N3 | China | 500,000 – 2 million deaths |
| Swine flu | 2009-2010 | H1N1 | Mexico | Up 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?
- The Greatest Recession - April 10, 2020
- Appraisal Inspection Procedures & Protocols - March 9, 2020
- Coronavirus Will Cause Our Next Recession - March 4, 2020
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.
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.
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.
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.
Speculation is fun.
Let’s call it chaos, that’s been going for a while now
Our local news is already addressing this.
https://www.kplctv.com/2020/03/03/southwest-louisiana-association-realtors-says-coronavirus-concerns-has-not-impacted-housing-market/
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.
thanks for info!
Love the realtor spin…As the virus is just getting started.
Yes they have, and they ROCK. Black Swan.
Coronavirus meme’s forthcoming.
There is a magic moment in time for things like this. Don’t miss it.
The Appraiser Recession that started 12 years ago has NEVER ended.
CORelogic = CORonavirus
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.
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
Coronavirus scare could result with more store bought products reading “Made In America” instead of “Made In China”
The moment when you realize, you’ve seen that symbol before.
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
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.
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.
No. This is going to be over well before anyone thinks. New York on “The worst week in History” according to our Surgeon General is now in rapid decline of new patients. Further the drug discoveries that ARE working is amazing. Baseball is now thinking about resuming in MAY! I think we will see a downturn in GDP for 1 quarter followed by a moderate to large uptick the next quarter due to pent-up demand. Your article and opinion seems to be in line with MSNBC and CNN, maybe you should be working for them. $100.00 to your charity of choice if I’m incorrect. You pick the amount for mine if you lose?
Dear Rick,
GDP down for the 2nd quarter … a whopping 32.9%!! We’re in a recession, you lose.
Please visit: https://www.cnbc.com/2020/07/30/us-gdp-q2-2020-first-reading.html
Please send your check for $100 to Save The Redwoods League at:
https://secure.savetheredwoods.org/a/donate
It may hurt a bit when you write the check but when you consider what it will do, it will make you feel great.
Thank you Rick!
Fred Rossiter
https://www.youtube.com/watch?v=cKbQbcInHnA
More viral censored covid disclosures from legitimate doctors.
Chaos by design.
Live next to a nurse who works on a COVID unit. This is not fake. it is really happening and people are dying…regardless of age/race/sex etc. Do what you can to protect yourselves on site and others as you do not know who will have a bad reaction regardless if they die afterwards or not. It is a horrible virus to have to recover from.Stay safe my fellow appraisers.
Watch the video. Nobody said it was fake. Those real doctors and nurses have good advice on simple ways to prevent yourself from getting it in the first place, and therapeutic treatments.
The ongoing reactions to this appears to be more dangerous than the disease.