Today’s economic situation during the coronavirus pandemic is totally different from the Great Depression during the 1930s, according to National Association of Realtors Chief Economist Lawrence Yun.
Yun spoke Wednesday during the Residential Economic Issues and Trends Forum at the Virtual Realtors Legislative Meetings, NAR’s first-ever virtual midyear conference. Two-thirds of its sessions are closed to nearly all NAR members and press, but the 1.4 million-member trade group is streaming some sessions, including the forum.
Yun acknowledged the uncertainty many around the country are feeling in regards to whether there will be a second surge of virus, how long the pandemic will last, growing unemployment, and whether particular industries will come back. But pointing to specific economic indicators — the unemployment rate, the pace of job losses, government spending and monetary policy — he disagreed with comparisons some were making to the Great Depression.
“[The] unemployment rate during the Great Depression [was] 25 percent. Today it is 13 percent but it may rise to 20 percent before going down,” Yun said.
Job losses during the Great Depression occurred very slowly, over five years, Yun pointed out. “Today [they] occurred not due to something wrong with the economy, but due to the pandemic. It was government-imposed economic lockdown that occurs swiftly in a five-month period before I anticipate some jobs recovering.
“In the 1930s, sometimes they increased spending [and] sometimes they reduced government spending because of concern with budget deficits. They said, ‘We need to balance the budget. Let’s spend less and let’s actually raise taxes.’ Today we are cutting taxes, [providing] relief for unemployed people and also … [have] the largest stimulus package ever.”
Yun also noted that bank failures in the 1930s lead to a contraction in monetary policy, or money supply. “Today the Federal Reserve is all in, going in to the maximum. So completely different pictures. Saying there is a corollary with the 1930s, I would say, ‘No, sorry, wrong similarities.'”
Yun highlighted some positive aspects of the economy: household savings rates rose, spending at building material and gardening stores rose, and 33 million people have filed for unemployment insurance cumulatively since the lockdowns started — but 26 million are receiving unemployment, which means some are finding work after only one or two weeks of unemployment, according to Yun.
Although the government is printing trillions to fund its economic rescue package, Yun does not expect inflation this year or next year or even in 2022.
“[There is] absolutely no concern over inflation which means the Federal Reserve can be very accommodative for a long time,” Yun said.
But he does anticipate inflation will hit in five or six years and that will have a negative impact on home sales, though home prices will go up — along with the price of everything else.
“Everything will be rising, rising, rising,” Yun said.
“What is one thing that will not be rising?” he asked rhetorically. Answer: The mortgage payments of those who buy a home now and in 2021 before mortgage interest rates increase, according to Yun.
He predicted home sales would decline up to 15 percent this year, but increase up to 18 percent next year with modest increases in home prices.