One of the best ways to curb fear during times of uncertainty is to educate ourselves with research, facts, and data. By observing past experiences and historical trends, we can better understand that which has yet to happen. While talk of a recession stirs in everyone’s mind, it’s best to take an objective look at how the housing market has successfully weathered previous storms.
There are many reasons indicating this real estate market is nothing like 2008. Today’s market conditions don’t suggest that housing is a key factor in the potential recession. We aren’t seeing home price appreciation skyrocketing, easy-access mortgages, excessive equity-tapping, or a surplus of inventory.
According to Danielle Hale, Chief Economist at Realtor.com, if there is a recession:
“It will be different than the Great Recession. Things unraveled pretty quickly, and then the recovery was pretty slow. I would expect this to be milder. There’s no dysfunction in the banking system, we don’t have many households who are overleveraged with their mortgage payments and are potentially in trouble.”
In addition, there was also a GDP forecast published by Goldman Sachs released mid-March indicating that although there is no immediate growth anticipated, gains are forecasted for the second half of this year and into the next.
These expert sources both indicate that yes, this is a momentary event in time, however, not a collapse of the financial industry. It’s a drop that can rebound quickly, much different than that of 2008.
Out of the past 5 recessions of U.S. history, 3 have appreciated home values. While it is true that they sank by almost 20% during the last recession, we’ve already identified how now is not like then. In the four previous recessions, home values depreciated only once (by less than 2%). In the other three, residential real estate values increased by 3.5%, 6.1%, and 6.6%.
Concerns on how COVID-19 will affect the economy are real. The other effects on the health of our friends, families, and loved ones are also genuine and scary.
As we wait out the repercussions of this novel virus, we can still be confident that housing is not the driver. The reasons we move—marriage, children, job changes, retirement, etc—are unwavering parts of life. And everyone needs somewhere to live.
If you have questions about what it means for your family’s homebuying or selling plans, please reach out to Eagle Mortgage. We are here to discuss your needs.