I expect the housing market to take a major dump, permanent loss of jobs, followed by repo's. Middle class will shrink by one-fifth (minimum). In the process of selling all my rentals (no lock-down in my State), content with recouping investment (or less). Personal residence, won't be doing anything, other than required maintenance, for at least two years. You asked.

Yep, scenario one is best case. The two week closure to flatten the curve has gone on way too long. And in CA you'll get lots of scammers who take your money and disappear since the jails have been emptied and no one has to post bail anymore.

Like the expression "all real estate is local" I think you'll see different scenarios play out in different parts of the U.S. depending on how they were affected.

Really,we live in Canada have had the lock down longer than the US and we are still thinking survival at the end of this and a different economy for at least the start of easing off with the rules. No one knows what is going to happen so just along for the ride right now. I think banks will be more invested in trying to keep people in their homes I would hope since flooding the country with repos is to no ones adavantage least of all the banks. Senario one is the most likely maybe in the US we in Canada have had a lot of government help so hopefully when it all blows over we will still be standing just a little wounded.

Any reputable professional- contractor with an outstanding crew will not have any problem finding jobs regardless of covid-19 before or after.

Never have and never will.

The hacks?

They're going to have a field day.

Will not be surprised to find more generational living under one roof as well.

BTW, fun question!

Curious on everyone else's opinion.

Can't say which scenario, but "safer at home" is over here. We had lunch in a restaurant today, salons are open, elective surgery is happening.

Well-priced homes in our neighborhood are still selling in a day, over asking.

Some of our neighbors hire bonafide contractors, but some go the cheap, "I got a guy" route. Will the bonafide ones lower their prices? Would be great, because we have some rotted siding which needs replacing, but not holding my breath.

Remodeling and new construction never stopped in our state. My sister & BIL are having a pool installed this month. A good contractor is always going to have work.

I think a great deal will depend on whether the states have timed the relaxation of rules correctly. I suspect that some have gone too early, before Covid is under control, and will be back on lockdown again, which will further delay reopening the economy. So, I think scenario 1 is the more likely, because I think there's more economic disruption ahead for at least some of the states.

We were in the process of getting bids for a very long-planned addition/remodel when our area went into stay-at-home mode. Financially, we're okay - I'm in the weird position of having been promoted just before this started, and possibly in line for another promotion, and we've always lived way below our means because my husband came to the US as a refugee and is always planning for disaster.

Still, we're moving more slowly now than we would have otherwise (which was already slow.) It's just really, really hard to pull the trigger on a large project. OTOH we don't have a lot of good options; we really really need most of the work (renovating really dilapidated bathrooms, windows, doors, etc.) We could scrap the addition, but the remaining work would probably only drop by 1/3rd and we'd still have to move out.

I doubt prices will drop much if at all in our high COL area. Probably fewer people will trade up and there will be more people like me, spending way too much time at home cataloging the many things that need fixing. And with no DIY skills plus 2 FT jobs and now the added burden of homeschooling, we need outsourcing to pros more than ever!

In my experience, when bad things happen to the economy and the housing market, remodels and such don't get cheaper when the recovery starts.

I'm the OP, and " fall into the camp with those of you who agree that scenario one is the most likely. I guess time will tell for all of us. Unfortunately, I think it's going to be a long, rocky road for all of us before things are anywhere close to normal again.

None of your options contemplate the many, many areas of the country like mine where remodeling never stopped or slowed down.

I think it depends on whether homeowners were already deep into the design process and already had money set aside, or if they are just embarking upon their project post-pandemic. The former will likely finish their projects as soon as the SIP orders are lifted in their regions. But the latter will be much more dependent upon consumer confidence and how much of a hit their investments took in the last couple of months. I'm anticipating a real slow-down in real estate transactions, which are the usual drivers of remodeling.

The big uncertainty here is unemployment. With 22+ million people out of work with more layoffs coming, people won't be tapping into their home equity until they know they can pay it back.

Yes, contractors' pricing will likely come down when they get hungry enough for work. But if remodeling/building means taking on more debt, I don't think that will be a desirable outcome for most.

Lastly, until kids are physically back in school and adults physically back to work, families are unlikely to embark upon remodeling projects with everyone working/schooling from home.

The fact that many people are working from home and educating their children at home at the same time is definitely something that comes into play and is something I hadn't thought about. I can see why people wouldn't even want to think about the mess and invasiveness of remodeling when they are confined to that space with no escape.

There has been no letup in demand in my sink replacement business. I'm holding my prices. When I can't get my rates, I'll retire. Probably just raise them until no one calls anymore.

Folks who have been on "lockdown" have had more than ample opportunity to compare their lifestyle needs with how their current home meets/doesn't meet them. That's impetus for remodeling provided they haven't lost their jobs and interest rates remain low.

The furnishings market is going to shrink. Retailers who have stores but are still doing well with internet sales are going to leave the malls because many of the malls are going to close down. The downturn in the market will give many companies the excuse to downsize and turn more work over to computers & robots.

• Someone will have to rethink all the manufacturing that is coming out of the Far East.
• I don't think people will be moving as often or traveling for work.
• If a person can unload a mortgaged home, I think they will seriously consider downsizing to something much smaller.
• A company that creates multi-function residential furnishings could have a leg up.

I live in CT about 45 minutes outside of NYC and housing sales in my area are climbing. People want to get out of the city and get more space and a place for the kids to run. Nothing seems to be slowing down too much here, although initially we put off our remodel, in a month or so we may move ahead.

I think people who've lost their jobs or had their incomes reduced will be doing a serious rethink of priorities once we come out of this. Too many people live on a razor thing margin of low savings, credit card debt and big mortgages. Some of them are going to focus on rebuilding their finances before worrying about renovations.

Others, less impacted financially, will carry on as before, maybe considering getting away from the inner core of the big cities (or maybe not). I'd like to think we'd all reduce our dependence on cheap imports from China, but I'm not optimistic, to be honest.

I like the idea of multi-purpose furnishings, and I think there'll be a boom in adding technology (but that brings Chinese products back into the picture). Home offices are definitely going to get a rethink.

I live 2 subway stops from the World Trade Center and construction is booming.

And then Gov Cuomo just reported that 66% of new covid cases reported in NY are from people who have already been "staying home."

Many of my neighbors are at their summer/vacation homes and plan on returning to the city at the end of this summer.

On my "nextdoor" feed countless neighbors are looking to renovate/spruce up their small, urban outdoor space and asking for contractor recommendations.

People who have basements by me are seriously rethinking that space also, agree with the rethink on home offices/command centers.

Scenario 5) (me) . After months of planning homeowner started their own Kitchen demo in January and took delivery of everything except countertops from Jan - early April. Postponed contractor due to Covd-19 concerns. In the meantime a double lightning strike hit around the property destroying quite a bit of electronics, outlets etc. A few weeks after that a bathroom water line bursts and ruins a half bath and hardwood floor, trim etc in family room. 3 Projects now and contractor is booked and hopefully can start in June. Happy homeowner also putting in a whole house surge protector and Moen Flo automatic water shut off system.

Wayne--

I'm sorry. This sounds like the pits!

In your scenario though the contractor already had work booked. It will be interesting to see if contractor status (in general) remains similar a few months out when people hadn't already booked contractors prior to the Covid crisis.

Something else to consider.

I just talked with someone who works in the mortgage industry. He told me that nearly all of the big banks (local one may be different) in the US have temporarily stopped financing home equity lines of credit and some other forms of financing that most homeowners typically rely on when remodeling. This is supposed to be temporary, but in today's world, who knows how long temporary will last?

@Patricia Colwell Consulting wrote, "I think banks will be more invested in trying to keep people in their homes I would hope since flooding the country with repos is to no ones advantage least of all the banks."

This isn't true in the USA. If you are unable to pay (loss of job, reduction of wages) the bank is required to repo the property. In 1989 the collapse (due to fraud) of Lincoln S&L caused the bankruptcy of hundreds of subdivision builders. This resulted in tens of thousands of homes (fully built / half-built) sitting "in limbo", some of them for years. The collapse also hit untold thousands of homeowners, many of whom were unable to re-fi because their homes, located in half-built subdivisions, no longer "appraised" at the mortgage value.

The average US citizen has no knowledge of "fractional banking", or the fact that their "savings accounts" are legally considered to be "investments in the bank" where they're held. My favorite quote from "Margin Call" (paraphrased) "The first one out the door is not in a panic". Recommended watching.

I'm in Canada like Patricia, and though we're still sheltering at home (as much as we can, since we live on a farm and it's seeding time), my husband, who's also a builder, still has all of his clients on his list from pre-pandemic times for new build and remodel projects, and is getting more from clients who want to remodel their current houses, to add home offices, turn basements into home school rooms, add a bathroom, etc. And commercial clients who want to revamp to take into account social distancing, no-contact pickups, etc. The clients who've been on the list for a year or more keep calling to make sure they're still on the list lol.

I will add that we're in Alberta, where the economy had been doing poorly for several years, with the result that many people who couldn't afford new builds have been doing remodels instead. Also, in our rural area, we're starting to see people moving here from cities, and they want their newly purchased houses to be fixed up ASAP.

My husband could be doing some of those remodeling projects now but has said that for safety's sake (his own and his clients') he's not taking any indoor jobs now, just exterior ones, like roofing and concrete. He's also concerned about 1) his ability to source building supplies steadily -- all of the companies here are moving very slowly and carefully with new safety protocols in place -- and also 2) what happens in the fall with a second big (or bigger) wave if he's at the start or in the middle of a new project -- if he gets sick, or someone in his client's household gets sick, or we get more/tighter restrictions for fall/winter, or it's harder to get building materials or source PPE.

The need for PPE and cleaning supplies, buying more materials at the beginning of a project to ensure a steady supply, etc means that his prices won't drop and might even have to go up; he's been talking to our insurance broker about coverage if a job can't get completed through no fault of his own. And with new, unknown clients moving here from the cities, and the concern that they might not have jobs (and thus funds) throughout the entirety of a project, may mean asking for more $ up front.

My husband doesn't think any of this is temporary and is starting to think what this means for construction in "new normal" times. Which in his case, since he's 60, could mean taking on smaller jobs for trusted, long-time clients.

Being intricately involved behind the scenes in many construction projects, the renovation and decoration demand now is higher than it was before other people started staying home and noticing that their home office looks really bad on Zoom.

The trades and construction never stayed home, virtually anywhere. During social distancing, and occupancy limitations for stores, Lowe’s and Home Depot both smashed spring records for sales of paint, lumber, cabinets, garden, and bath plumbing. It’s the very fact of white collar money staying home that’s creating the current big boom of projects. Many contractors have raised rates, in order to deal with the extended protection and longer timelines that are now happening. People are paying the higher prices too.

The longer people wait to get in line with their projects, the higher the prices will be. That goes for materials and labor both.

I agree with einportlandor. If we did not begin in Jan, we'd have never started the project we are invested in now.

Awfully upbeat comments on this thread! I also hope we hit the ground running when there is a vaccine but until then I certainly am not fully participating in society and I don't think I'm alone in that. In fact, a poll asked Americans about what their behavior would likely be like AFTER a Covid-19 vaccine... 32% said they will be less likely to fly, 35% less likely to dine out, 40% less likely to attend large public events, 36% less likely to use public transportation, 34% less likely to go to the cinema.

The wound is deep and the overheated economy, LONG overdue for a recession will need time to do just that. Projections show a potential 25% unemployment rate for a few months or longer, the real estate market will correct. I've seen it several times in the last 30 years but never one so justified. Of course, builders/contractors will lower prices.

I think Paul may be on to something.

chiflipper, just to clarify your comments on the banking system. A bank reports a customer savings account as a LIABILITY on their balance sheet, which means they need to safeguard the $$ and owe the depositor their money back. It's not an investment/asset of the bank, it's an asset for the depositor. The bank will then lend out that money, but need to keep a specified portion (fraction) to have it available for customer withdrawals. The problem arises when everyone wants to withdraw their funds at the same time, which the banks can't do, resulting in a run on the bank. (See "It's a Wonderful Life" for a great illustration of this.)

Also, to Patricia's comment, banks will do everything possible to avoid foreclosure/repossession of homes. It takes a long time and includes working out a new payment plan, and lengthy notification processes before a foreclosure is accomplished. Really, banks do NOT want to own all those homes.

A bank reports a customer savings account as a LIABILITY on their balance sheet, which means they need to safeguard the $$ and owe the depositor their money back. It's not an investment/asset of the bank, it's an asset for the depositor.

I believe you are misunderstanding, this is a problem with using accounting terms in every day life and altering their meanings just a bit. The accounting equation is simply Assets = liabilities + Owners' Equity, and like all equations it must balance. For a business liabilities and equity are a way to divide up the assets between owners and lenders. So to have a liability they must have assets. Therefore, your deposits to a bank represent assets of the bank and liabilities of the bank.

Think of your home... Your home is an asset to you while the amount of mortgage principal owed is a liability to you. The liability exists because the asset does if you didn't have the home, you wouldn't have the mortgage.

Here is my 2 cents and worth at least half that...

We have to remember that "the economy" is not some abstract thing. It is income for people. GDP is literally the compensation people receive for their efforts. This compounds because of the GDP multiplier, simply put... If you lose your job the GDP loses more than your wages, because you spend your money on things like rent, food, entertainment, clothes, etc. Those businesses where you spend your money use it to pay their employees who use it buy stuff so still other businesses can pay their employees. So the economic effect of 10% more unemployment can be large. The current GDPNow estimate (which uses indicators to estimate actual GDP and is not a projection) is scary, the latest estimate is -41.9%.

I assure you, you are going to feel a 42% contraction in GDP. Yes, construction is still going, house prices are up, etc. However, that doesn't mean a lot, as the government and businesses have done lots of things to delay the pain, but they have not erased it. I am just letting renters who can't pay rent right now live for free, I am planning on crediting all my renters 3 months free rent, but if they don't go back to work I am eventually going to have to evict them. I can let people live rent free during a pandemic but I can't do it forever. However, it is going to change the money I have available to invest and the same is true for a lot of people.

We still need people investing in bonds and MBS's to fuel the mortgage machine and they are not, so something is going to have to happen there. Maybe mortgage rates that are effectively negative. That has been done before and it does work, but there is the moral hazard problem.

The government can keep injecting money during the pandemic and delay the pain Keynesian style, but eventually they will have to stop.

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Here is my projection, it is an educated projection, but it is still just a guess. Actually, my projection is OK, it is my assumptions that are questionable.

There will be a slow down in entry level home purchases (which drive the entire housing market). Houses will not lose that much value but they will slow down appreciation, largely this is going to happen because the number of buyers and sellers will both go down.

The HELOC market is going to get tighter. We are going to move away from 100% & 95% LTV and go back to 80% and 85% LTV. Rates will stay down but approval will be a bit more difficult, and you will see more actual appraisals ordered.

The low wage labor market will get a lot more competitive and construction wages will drop. Construction costs will drop with that and construction will become a bit more competitive. However, we could also see people more willing to improve existing homes than sell, so it might balance out and just become more profitable.

In general, I believe there is a serious possibility that we see a change in liquidity versus equity. For years we have seen people preach about paying off your house because we have had a few asset bubbles in the last 30 years... Now we are seeing a liquidity crunch, where people with paid off houses and little savings are driving to food banks in order to eat. I suspect we may see people start valuing cash savings over home equity.

I also believe the rental rates will become more competitive for the next 5 years. So that may have positive or negative affects on home value depending on your area.

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If you use any of that stuff above to make a decision, well you're a gambler. My advice to clients today is largely the same as it was before with a few modifications. If you are making a move I would suggest you not depend on a quick sale of your existing property. It may sell quick and that is great but make sure you can make two payments significantly longer than you hope to. You can't eat your shingles, don't sacrifice access to liquidity for equity. Until we can see past this, which will be a couple of months from now, plan but don't execute.

bry911, you're right, there has to be an asset (or another debit) to offset the liability (credit) of the savings account. That debit is cash, which then is lent out and becomes the asset known as a loan. But it doesn't change the fact that the bank has a liability. And equity only comes into play when the bank earns interest revenue on the loan.

there has to be an asset (or another debit) to offset the liability (credit) of the savings account. That debit is cash, which then is lent out and becomes the asset known as a loan. But it doesn't change the fact that the bank has a liability. And equity only comes into play when the bank earns interest revenue on the loan.

There are many ways that banks make revenue from processing charges to fees on accounts to interest rate spread to origination fees. None of that changes the fact that when you deposit money in a bank they get an asset and a liability. To say that your deposits are not an asset to the bank is misstatement, your deposits are an asset to the bank, they may transform that from cash to a different asset, but the money you deposited increases an asset and increases a liability.

@bry911 Alas, I empathize with Cassandra. Now you might try to explain, in crayon, the vast intricacies of "the world's reserve currency"; why, when, who...and why the understanding of same is important. Good luck with that.

This is getting pretty esoteric for me, but maybe the coronavirus is an expert on macro- and micro-economics...

Here is a less esoteric version. It took almost four years for U.S. GDP to drop 27% during the great depression. We have dropped 42% in the last three months. It will come back up, but even under the most optimistic scenarios this will be the largest single year GDP decline in U.S. history, in fact, unless almost all jobs return at full pay this will beat any two years in U.S. history.

Just because construction is OK in your area right now, doesn't mean a lot. We often see a significant lag. By all accounts the worst years for the great depression were after GDP was improving. The effects of March and April are probably going to be felt in September and October. So don't look around you and think because everything is ok today, everything will be ok tomorrow.

It may well be ok... but a 42% decline in GDP (compensation) is something that every American is going to feel, so plan accordingly.