Will COVID-19 Recession Cause a Housing Crisis?
The COVID-19 Pandemic is raising a lot of questions, concerns and panic. The last recession of 2008 is still fresh on our minds, and understandably, people are worried about a housing market crash. There has been speculation for a while that our current hot market bubble will eventually pop… So, is this pandemic the pin?
Watch our latest video where Jordan addresses the concerns on whether a recession equals a housing crisis:
3 Reasons Why a Recession Does Not Equal a Housing Crisis
I am going to speak today about how a recession does not necessarily equal a housing crisis. There are a few reasons for that. I am going to focus on three.
The first reason I do not believe a recession equals a housing crisis:
Out of the 5 previous recessions we have had, only in two of those were housing greatly impacted. And both of those recessions were actually lead by housing. One of those of course was the subprime meltdown of 2008, which is fresh enough that we all remember it. And the other one was in 1991, which was the savings and loan crisis. The other most recent three recessions, housing prices actually went up which is really interesting.
The second reason I do not believe a recession equals a housing crisis:
Macro indicators are still really strong. Now this could change if the Coronavirus lasts 3-6 more months, but as of now, we look at housing starts, GDP growth, unemployment, interest rates. All of these macro indicators are still very strong.
The third reason I do not believe a recession equals a housing crisis:
The fundamental metrics are still very strong. It really all comes down to supply and demand. Supply and demand will determine our activity and pricing. What we’re seeing is that inventory is extremely limited. In fact, the Coronavirus is making the supply even more limited because there are some folks right now that are pulling their homes off the market and hitting the pause button until this thing gets figured out. While demand is taking a little bit of a timeout right now, the expectation is that once liquidity comes back into the market and all of this refinance boom fades away, interest rates will find their very low bottom, demand will be restimulated and housing will hopefully be back to its normal pace. We don’t really see supply and demand just changing dramatically. Things take time, which is why housing does not follow the stock market. The stock market is very volatile and moves more quickly, whereas housing lags and is a slower-moving market.
In my opinion, I do not think a recession is going to equal a housing crisis.