Housing

► April home sales plummeted by 25 percent, 3-month MA annual. Istanbul is down by 28 percent. This is the first datum reflecting the initial impact of the outbreak. Price data comes next.

► As the household struggles to keep the real value of its savings intact in the face of low TRY rates, housing can become an investment option. Real estate and stocks are candidates.

► The April print doesn’t betray such a tendency. However, in addition to under the pillow FX and gold holdings, housing and stocks may become the third option come midsummer.

► This is important given the enduring bias for real estate development. One of the two pillars of capital formation is in construction. Low rates primarily target this sector.

► However, demand for homes dropped in Q4 2019 and in Q1 2020 even before COVID. This is despite continually falling mortgage rates. First FX demand and second confidence are key.

► Yet nominal prices still continue to go up although the increase is much lower than inflation. Turkey-composite posted an 8.72 percent rise in April and Istanbul 6.74 percent annually.

► U.S. home prices are more resilient although they too are indicators of recession. March data gave us no hint because Case-Schiller is up. Here such prices are more important.

► If housing demand surges come summer this will be a sign of early recovery. If this happens and TRY deposits fall, and FX demand stays put, then there is portfolio reallocation.