As we’re figuring out a new normal, at least temporarily, the best thing we can do to ease our fears is to educate ourselves with research, facts, and data. By taking a moment to review past experiences, analyze historical data, and understand the peaks and valleys of what’s to come, we’re able to evaluate our situation better. Across the world, many of us are experiencing a terrible pandemic that’s leaving us with more questions than answers, especially when it comes to the economy. Homeowners are wondering, are we on the brink of another crisis, like the one experienced in 2008? Let’s take an objective look at what has happened over the years and how the housing market may or may not be affected.
The Housing Market Today vs. 2008 Housing Market
The good news is this is not 2008, and today’s housing market is not a key factor that will trigger a recession. From easy-to-access mortgages to rapidly increasing home price appreciation, an abundance of inventory, excessive equity-tapping, and more – we’re not where we were 12 years ago. None of the factors I just listed are players in today’s market, so homeowners can rest assured knowing that the market is not a situation that could spiral back to what we saw during the 2008 housing crisis.
Chief Economist at Realtor.com, Danielle Hale, was quoted as saying, “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 late March, Goldman Sachs GDP Forecast was released. While there is no immediate growth anticipated, the second half of the year should be strong and last into 2021.
Both Goldman Sachs and Danielle Hale indicate that the crisis is not a collapse of the financial industry. It is believed that this is a drop that will soon rebound, which is a stark difference to the 2008 housing industry, which took nearly four years to normalize again.
A Recession Does Not Mean a Housing Crisis
Now, let’s review the last five recession that the US experienced. You can breathe some sigh of relief because, in three of the recessions, home values went up. I know what you’re thinking; in the most recent recession, home values decreased by nearly 20 percent. While that is true, we also just discussed how this is very different from the 2008 recession. Below is a chart of how much home values changed during the previous recessions.
We’re Confident About What We Know
The concerns that we’re being made aware of regarding the impact of COVID-19 on the economy are real, and yes, they’re incredibly scary. Especially to those who are being personally affected by the repercussions of the virus.
According to an article released by Bloomberg News, “Several economists made clear that the extent of the economic wreckage will depend on factors such as how long the virus lasts, whether governments will loosen fiscal policy enough and can markets avoid freezing up.”
So, what can we take from this quote?
No, we don’t know the exact impact the virus will have on the housing market, but we do know that the housing market isn’t in the driver seat.
We all move to new places for a number of reasons, we get married, start a family, change jobs, or decide to adjust the size of our living arrangements, and those are all parts of our everyday life. We know that everyone needs a place to call home, and that’s never going to change. That is why Dallas real estate agents are continuing to work hard on behalf of their clients and have been deemed essential during these unprecedented times.