Where We Are Now: April 17, 2020

Work From Home — Day 33

Perspective & Who Wins?

5:15AM PST

Team –

You will have to read to the end to find out who wins!

Yesterday Leslie Appleton Young, Chief Economist at C.A.R., shared some perspective with us. Leslie is a legend in my mind. She is brilliant, an exceptional communicator, and has a rare ability to make the complex simple.

A lasting impression Leslie has had on my business life was in a presentation of a decade ago. Leslie was asked, “when is the best time to buy real estate?” Her answer was “five years ago.” I think she referred to the statement as everlasting, always.

So simple, so true!

Think about the market five years ago. Think about the market disruption in the next ninety days. Then extend that opportunity five years out. Interest rates! At a certain point in the coming months, we should all buy as much real estate as our balance sheets can handle.

Some highlights of Leslie’s presentations, from a macro perspective:

  • Of nine financial intuitions GDP forecasts for Q2, the low was -50 percent and the high was -6.5 percent.          
  • Same nine financial institutions called Q3 low at -2.3 percent and the high was 20.7 percent.
  • Once again, nine financial institutions see the entire 2020 with low at -10.4 percent and the high was -0.4 percent.

These are extraordinary, nearly violent swings. If the accurate GDP for 2020, of which consumer spending is the majority, is relatively flat to down 10.4 percent from today, we are in for a wild ride June to December 2020.

Moving from 30,000 feet to sea level: 

  • California will lose 31.5 percent of daily GDP under shelter-in-place.
  • Revenues of restaurants, travel, hospitality, Broadway shows, movie theatres and professional sports come close to zero in twenty days. Think about that!          
  • Average daily pending home sales since March 15, 2020 are dramatically decreasing.
  • Confirming our own survey, over 50 percent of California closing delays were lender-related issues. They are swamped, and that is a healthy signal to our markets.
  • Our greatest risk, to our health and to our business, is rushing the curve. I’d expect my distance from you to be more than 6 feet for another thirty more days, minimum.

Revert for a glance back to the GDP predictions above. This suggests a remarkable surge from the bottom in 2H of 2020.

Leslie’s position on Who will the Winners be?

  1. The tech-enabled.
  2. The relationship-centered (those who keep in touch)/
  3. Housing.

My reaction to the above: 1) Compass comes to mind. 2) You come to mind and 3) Us! We will be winners!

This is Where We Are Now.



Mark A McLaughlin

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