2026 OPERATOR’S RETROSPECTIVE:
Reading this dispatch from early 2020 reveals a massive structural blind spot the industry had at the time. We thought the market was simply extending a long cycle. The reality on the ground was that the cycle had already effectively ended in late 2018. Affordability was already waning fast after banks and private institutions scraped the cream off the housing market following the GFC foreclosures. Looking back, COVID didn’t break the housing market—the resulting flood of cheap debt actually saved it. It artificially bailed out the industry, masking the underlying rot of our distribution channels and delaying the boiling point for another few years. I am committed to reading the data and not leading it. I do not need recognition; I want results. Here is what the data said right before the world changed.
Positive Signs on the Macro Level
As we evaluate the housing market at the onset of 2020, there are encouraging signals for the health of American real estate. The U.S. economy continues to expand, breaking records for the longest streak of positive GDP growth in history.
Major U.S. stock indices reflect this confidence, with both the S&P 500 and the Dow Jones hitting record highs in December 2019.
This bullish sentiment translates to household optimism. When consumers feel financially secure, it acts as a primary catalyst for increased home sales volume.
The U.S. Federal Reserve played a central role in shaping this environment in 2019. After initially raising and holding the Fed funds rate steady, Chairman Jerome Powell lowered it twice.
According to the St. Louis Federal Reserve, the effective federal funds rate currently sits at 1.55%, down from its peak of 2.42% in April 2019.
Because the Fed's interest rate directly influences mortgage rates, this cheaper financing provides a massive incentive for prospective buyers to enter the market.
Addressing Macro Frictions
While macroeconomic factors look positive, it would be a mistake to ignore structural concerns that emerged in the second half of last year.
The escalating trade war between the U.S. and China presented a legitimate threat to global economic growth. As tensions rose, institutional investors braced for the possibility of a global recession and its subsequent impact on the U.S. economy.
Compounding this, major European economies exhibited concerning growth deceleration. However, recent strides in U.S.-China trade negotiations have served to calm equity markets going into Q2.
Housing Market Data & Potential Risks
The latest data from the U.S. Census Bureau and the Department of Housing (November 2019) indicates an extremely healthy demand baseline, with solid year-over-year growth in residential home sales.
Despite a mid-year dip, the overall trend for 2019 was a marked improvement over the steady declines witnessed throughout 2018. Markets rarely sustain this level of stability without correction.
The primary risk to this housing outlook is the 2020 Presidential election. The housing market's current strength is heavily tethered to consumer and investor confidence in existing economic policy.
A radical shift in the political or economic agenda could severely fracture the confidence required to sustain this volume of real estate transactions.
