I decided that a national update was more important than Vineyard sales stats right now. If you’re wondering if the country is heading into a recession due to the Coronavirus, you’ll want to watch this video.
First, I want to say that there is no way anyone can say the real estate market will not be affected by the Covid-19 outbreak. However, what we’re seeing is that some markets are remaining strong, even amid this difficult time. Some people do have to move, interest rates are extremely low and there are people who have not been impacted financially during this pandemic.
As far as the difference between what is happing in the world right now and what was going on back in 2008, one thing we need to look at is APPRECIATION, MORTGAGE CREDIT, NUMBER OF HOMES FOR SALE and HOME EQUITY.
Regarding APPRECIATION – prices have been rising lately, but not at the rate they were climbing back when we had runaway appreciation.
The MORTGAGE CREDIT AVAILABILITY INDEX is a monthly measure by the Mortgage Bankers Association that gauges the level of difficulty to get a loan. The higher the index, the easier it is to get a loan; the lower the index, the harder.
Obviously, you can see by the graph here, lending standards have remained in place, keeping this number steady.
Today, we don’t have enough HOMES ON THE MARKET for the number of people who want to buy them. The difference is shown here from 2011 until today, which indicates an undersupply of homes.
Now, this chart shows the difference in how people are accessing the EQUITY in their homes today, as compared to 2008. These days, consumers are treating the equity in their homes much more cautiously. And, 53.8% of homes across the country have at least 50% equity. In 2008, many homeowners owed more money than what their homes were worth.
So, what does this all mean as it relates to the type of recession we will see?
The forecast from Goldman Sachs, JP Morgan, and Morgan Stanley are all saying the same thing. We’re in for a wild ride over the next 90 days, the second quarter of this year, but we’re also in for a wild ride up through the rest of the year. So, if you look at the graph below here, you can see that every one of the major financial institutions that we have on the graph agree that that’s exactly what’s going to happen. We’re going to have what they call a V-Type of recovery, strong down, strong up like if you took a tennis ball and threw it as hard as could against the ground, it would bounce right back up again, and everyone is agreeing to that, and that’s good news.
Johns Burns Consulting, a major consulting firm in the real estate industry has studied past pandemics, and they’re also saying it’s going to be a V-shape, and it’s not going to impact housing prices dramatically.
This is a quote from their research team:
In closing, from everything that I’ve read on what is going on right now and what has happened in the past, it sounds like the real estate market is going to be ok. The distinct differences between now and the Great Recession indicates that the housing market should follow a much different path. I know that we all have been living with some major fear and anxiety over the last few months, but I am hopeful that having this information will help in some way.
As always, feel free to reach out with any questions. I hope you are hanging in there and making the best of whatever this crisis has thrown at you.