Worried about a housing crash?

Is a Recession Here? Yes. Does that Mean a Housing Crash? No.

On Monday, the National Bureau of Economic Research (NBER) announced that the U.S. economy is officially in a recession. While the word recession sounds worrisome, this did not come as a surprise to many, the word doesn't mean that the economy is going to tank the way we saw in the early 2000's. NBER defines a recession this way: “A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”

Though not surprising, headlines announcing the country is in a recession will cause consumers to remember the devastating impact the last recession had on the housing market just over a decade ago. It is important to know that the real estate market, however, is in a totally different position than it was in 2008. Mark Fleming, Chief Economist at First American, explains:

“Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But, there are distinct differences that indicate the housing market may follow a much different path. While housing led the recession in 2008-2009, this time it may be poised to bring us out of it.”

Four major differences in today’s real estate market are:

  1. Families have large sums of equity in their homes

  2. We have a shortage of housing inventory, not an overabundance

  3. Irresponsible lending no longer exists

  4. Home price appreciation is not out of control

Another thing to know is that in three of the four previous recessions prior to 2008, home values increased! And in the other one, home prices depreciated by only 1.9%.

Bottom Line Yes, we are now "officially" in a recession. However, unlike 2008, this time the housing industry is in much better shape to weather the storm.

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