It’s no lie the coronavirus is affecting every single one of us. Many are questioning the future of the economy, unemployment and more. With that comes questions as to what’s gonna happen to the real estate market. With so many businesses having to shut down for several weeks and the stock market taking a hit, some are left wondering if we will see a housing crash like in 2008.
Lawrence Yun, the chief economist for The National Association Of Realtors, came out and said, “The monetary policy change is the same one applied a decade ago during the Great Recession. The lowest rates combined with quantitative easing. This is an all-out measure to prevent a recession and fight the fear that is blanketing the country. It is the right policy, since the policy can be easily reversed should a vaccine be discovered or the virus goes away. During the last recession, real estate was on wobbly ground with loose lending and too much supply. Today there’s no subprime lending and too little inventory. The real estate market will hold on much better.”
When it comes to the stock market I know that the recent stock market correction from the coronavirus has caused a lot of concern. But let’s look to history to help give us an idea of where we’re headed. In fact, in the last 20 years we’ve actually lived through five virus emergencies.
- Avian Flus
In each of the last five virus emergencies, the stock market reacted similarly to what we’ve seen happen this time. Each time the initial reaction to the virus emergency, the stock market returned. Now that’s not to say there weren’t hardships or tragedies during those times, but the stock market always returned.
It’s important to remember a stock market correction does not equal a housing crisis. It’s totally normal to feel wary given what happened in 2008. Ali Wolf, the director of Economic Research at the real estate consulting Firm, Meyer’s Research says that, “People having PTSD from the last time they’re still afraid of buying at the wrong time.” But it’s important to note what’s happening today is not like what happened back during the Great Recession, and here’s why.
The economic slowdown that happened in 2007, 2008 and 2009 was caused by a collapsing real estate market and a meltdown in the mortgage market. This time the stock market correction is being caused by an outside event: the coronavirus.
David Rosenberg, chief economist with Gluskin Sheff and Associates, recently put it into perspective, actually comparing what’s happening now to what happened following 9/11. He said, “What 9/11 has in common with what is happening today is that this shock has also generated fear, angst and anxiety among the general public. People avoided crowds then as they believed another terrorist attack was coming and are acting the same way today to avoid getting sick. The same parts of the economy are under pressure, airlines, leisure, hospitality, restaurants, entertainment. Consumer discretionary services in general.”
Since the current situation resembles the stock market correction in the early 2000’s, let’s review what happened to home values during that time. The S&P dropped 45% between September 2000 and October 2002. Home prices on the other hand appreciated nicely at the same time as evidenced on this graph. The stock market correction proved not to have any negative impact on home values. The bottom line is, that the current situation is more like the markets in the early 2000’s versus the markets during the Great Recession.
Home values should be impacted minimally if at all. So as you’re trying to decide your next real estate move, remember, that a stock market correction does not equal a housing crash. Just like a recession does not mean a housing crash. And I will continue to remind you that in three of the last five recessions home prices actually went up.
The national housing market is still moving forward. New homes continue to hit the market and there are several strategies to keep you safe and healthy, whether you’re looking to buy and/or sell during this time.
If you have any questions about new safeguard procedures, please feel free to reach out to me and I’d be happy to discuss. And remember, this situation with the coronavirus is ever-evolving. I’m keeping a close watch on what’s happening and I will continue to bring you updates for the real estate market as needed.