COVID-19 has brought fear, pain, and uncertainty for many people. During these troubling times, it is important to stay educated and up-to-date with the latest information. You may have heard that we are in a housing crisis, but I am here to hopefully help calm your fears and give you the facts on this topic. As always, I am just an email away if you have any questions or just want to talk.
1. Today’s market is vastly different from 2008. We all remember the market crash of 2008 but luckily, this is not 2008. As a refresher, the stock market crash of 2008 was the biggest single-day drop in history up to that point. The aftermath of this catastrophic financial event wiped out big chunks of Americans’ retirement savings and affected the economy long after the stock market recovered. The stock market crashed because too many people had taken on loans they couldn’t afford. Lenders relaxed their strict lending standards to extend credit to people who were less than qualified. This drove up housing prices to levels that many could not otherwise afford.
The good news is, today’s market conditions are far from the time when housing was a key factor that triggered a recession. We have easy-to-access mortgages, a surplus of inventory, and excessive equity tapping. You can rest assured that housing is not something that would take us back to that time.
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.”
2. Even if there is a recession, this does not mean there will be a housing crisis. If you look at the past five recessions in U.S. history, home values actually appreciated in three of them. In 2008, home values did drop by almost 20% but 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%.
3. While we don’t know the exact impact the virus will have on the housing market, we do know that housing isn’t the driver. COVID-19 has no doubt impacted our economy and will continue to do so. However, everyone needs a place to live and this is not going to change.
Concerns about a recession are real, but housing is not what is causing it. If you have questions about what it means for your family’s home buying or selling plans, give me a call at 919-961-3277 or email me at Annie@HudsonResidential.com.