Stimulus, Stocks & the Alabama Housing Market

Congress is in high gear as it nears the finish line to pass a coronavirus aid package estimated at $2 trillion. The stimulus plan aims to fight the economic downside of the coronavirus pandemic, which has brought quick and drastic changes to our daily lives and routines. Senate Majority Leader Mitch MCConnell, R-Ky, said “This is a wartime level of investment into our nation.”

The historic relief package is vast and aims to help families, small businesses, corporations, health care providers, state and local governments, and the arts. Family assistance would include direct payments of up to $1,200 for most individuals and $2,400 for most married couples filing jointly and an extra $500 for each child. Assistance would phase out for individuals earning more than $75,000 and for couples earning more than $150,000. Plans to expand unemployment benefits would raise the maximum benefit by $600 per week for up to four months. The plan also includes benefits for part-time, self-employed, and those working in the gig economy. Again, these examples only touch the surface as the aid package is vast. Hopefully the combination of individual sacrifice (social distancing, quarantines, etc) and Congressional aid can help contain the virus and its fallout in the months ahead.

Tuesday, March 24, 2020, was also a historic day for financial markets. With a daily increase of over 11%, the Dow Jones posted it’s largest single-day gain since the 1930s. News of Congress nearing an agreement on the coronavirus stimulus package spurred the gains, and the momentum continued into Wednesday as the DJIA finished the day up 2.4%, while the Nasdaq dropped slightly, less than 0.5%.

While the recent gains are encouraging, the DJIA is still in bear market territory, down roughly 26% from the peak in mid-February. The volatility has been difficult to watch, especially if one logs into their IRA to digest the recent swings. While taking action is often what is needed in a crisis, many experts believe that the best course of action in a bear market is … to do nothing. The selloff won’t last forever, will it? Holding one’s position also allows for future gains (like Tuesday’s 11% rally), while those that sold recently missed out on the market’s biggest daily gain since 1933. Of course, everyone’s situation is unique. Those in their 30s and 40s have time on their side, while others have more urgent financial needs. Attempting to time the market can also be difficult. Holding one’s hand out to catch the falling knife is risky to say the least. While undoubtedly many fortunes have been made by actively trading in the last month, sometimes simplicity works best. Be confident while taking little action, especially if your horizon is long-term.

While the housing market was off to a fast start in 2020 in both Alabama and the United States, the impact to March sales remains largely uncertain. Sales will likely be below March 2019 levels as social distancing and public health are prioritized, especially in the second half of the month. It is likely, however, that deals reached in February and closed in March boost the numbers somewhat, but we will not know the exact impact until mid-April. ACRE Research will continue to publish monthly reports on the residential market in Alabama.

Who knows what we will learn as the effects of social distancing, shelter in place ordinances, and quarantine continue to unfold. Also, as Americans spend more time at home they think more deeply, perhaps, about their current housing situation. Once this has passed, it would not be surprising to see a wave of pent-up demand emerge, potentially boosting home sales down the road.

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