We’re living in a time when there’s much uncertainty, and everyone’s concerned that there might be a global recession. Don’t let fear take over our lives. What we can do to lessen our worries is to look at the research and data. To assess the situation, we should examine historical trends and understand its highs and lows.
Let’s take a look at history and see how the housing market has bounced back from disasters.
This is Not the 2008 Recession
In 2008, the housing market mess was one of the leading causes of the recession. The current housing market condition shows that housing will not trigger another recession at this time. We’re not seeing soaring home price increases, easily accessible mortgages, excess inventory, and too much equity tapping that were all present in 2008.
Danielle Hale, Realtor.com Chief Economist, states that: “… there is no dysfunction in the banking system; we don’t have many households who are over leveraged with their mortgage payments and are potentially in trouble.”
As the Goldman Sachs GDP Forecast this week argues, we cannot expect growth right away, but there will likely be gains for the economy going into the second half of the year, and even getting stronger in early 2021.
Both sources point to a temporary setback for the financial industry, not a collapse. And we’ll see the sector bounce back quickly, unlike in 2008 when it took about four years for things to return to normal. While there will be many challenges ahead, a probable recession this year will not be a replay of the 2008 housing market crash.
A Recession Does Not Equal a Housing Crisis
A glimpse at the last five recessions in US history reveals an appreciation of home values in three of those episodes of recession. Yes, home values declined by almost 20% during the last recession, but it’s already established that the situation in 2008 was unique. In the four earlier recessions, home values decreased only once, by less than 2%. For the other three, we saw real estate values rise by 3.5%, 6.1%, and 6.6%
Be Assured By What We Know
We all worry about how COVID-19 will affect the economy. The concern is valid, as we also think about the health and wellness of our own family, friends, loved ones, and our community as well.
Bloomberg notes that “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.”
With that, we can be assured that even if we’re uncertain of COVID-19’s effect on the housing market, we know that housing isn’t the trigger.
Whatever happens, housing remains an essential part of everyday life.
We all worry about a recession but know that housing won’t trigger it. Better seek a trusted local real estate professional to talk about your home buying or selling plans.