Is A Recession Here Yes Does That Mean A Housing Crash No Is A Recession Here Yes Does That Mean A H

Dated: 06/12/2020

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

On Monday, June 8, 2020, the National Bureau of Economic Research (NBER) announced that the U.S. economy is officially in a recession. This did not come as a surprise to many, as the Bureau 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.”

Everyone realizes that the pandemic shut down the country earlier this year, causing a “significant decline in economic activity.”

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.

The real estate market, however, is in a totally different position than it was then. As Mark Fleming, Chief Economist at First American, explained:

“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:

-  Families have large sums of equity in their homes, which can be used as a down payment.

-  Inventory is at historically low levels, which drives prices up. 

-  Irresponsible lending no longer exists

-  Home price appreciation is not out of control

We must also realize that a recession does not mean a housing crash will follow. In three of the four previous recessions prior to 2008, home values increased. 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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Katrina Williams

I am a real estate broker serving all of Puget Sound. I believe honesty & transparency are crucial in real estate. I will be by your side through the transaction, and available to answer any of your q....

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