How will coronavirus impact economy and housing market?
Is the Fed’s announcement on lower interest rates considered an emergency? Matthew Gardner is the Windermere Chief Economist, and joined Seattle’s Morning News to discuss the coronavirus’ impact on the economy and the housing market.
“Yeah, I think the market was certainly expecting something to happen. You’ve certainly seen interest rates drop across the planet,” he said. “My concern, quite frankly, is not so much the validity of it, but is it going to have any real impact other than creating more paranoia and more concern?”
“Another thing about it is if you look at when the Fed has reduced rates between meetings, it’s been for essentially far different reasons than this. It’s never done it because of any form of pandemic, it’s always been financial, like post 9/11 and during the dot com crash.”
This is by no means the first outbreak of a contagious virus, so how will the economy respond?
“Markets essentially have handled it [contagious viruses] and handled it quite reasonably. I think this is very different here. Here’s the reason why: I think the stock market actually has been overboard for quite some time. Why has that been going on? Well, interest rates have been very low. Everyone’s chasing a return so they’ve been putting money into the stock market.”
“So the market, quite frankly, knew it was overvalued. It was looking for some kind of speed bump to allow itself to pull back, but rather than finding a speed bump it met a brick wall. So it’s obviously a tremendous drop in equity values over the course of the last week or so.”
What’s the impact going to be on housing? For Gardner, it depends on how much fears of coronavirus alters how people behave when looking for housing.
“Are we going to see slowing down in terms of open houses, of people not going to go looking for houses? That’s the big uncertainty. Now, even if we do see some slowing down, the market is still very buoyant, very resilient, still very tight,” he said.
“This too will pass. Housing is resilient. It’ll be just fine.”
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