It’s all you hear on the news, it’s all you read in the papers, and it’s all you see on social media. The coronavirus is everywhere, and it’s safe to say that everyone is scared, both of the disease itself and the potential economic implications of the whole country going into a temporary quarantine.
Echos of the 2008 housing market crash have many agents imagining doomsday scenarios and assuming the worst.
But in a recent article published by USA Today, Gus Faucher, chief economist of PNC Financial Services Group, said, “A recession is not inevitable. If we do get a recession, it is likely to be brief and much less severe than the Great Recession.”
Faucher notes that the 2008 financial crisis and recession resulted from years of deeply rooted economic insecurities, which isn’t the case now.
“What we’re seeing is caused by something external to the economy,” Faucher said.
There are key differences in this market that spell good things for the housing market despite recent events. Let’s examine some of the key indicators that we will avoid a housing market crash.
1. Inventory is low.
A December 2019 Forbes article predicted a historically low level of housing inventory in 2020. According to NAR statistics, there is a chronic shortfall of 300,000 to 400,000 housing units every year.
Bryan Souza, a real estate agent from Fresno, Calif., who worked through the 2008 recession, says there is a key difference between that market and today’s.
“Back then, we had 18 months of supply…it was a buyer’s market,” Souza said. Today, in our local metro and actually nationwide, we’re looking at two to three months of inventory. And so, it’s more of a seller’s market.”
Even when markets turn, buyer demand remains. Even if some buyers initially delay their purchases out of fear, when that fear subsides, most buyers will still want to buy — and that pent-up demand will turn into sales.
2. Mortgage rates are low.
Mortgage rates have been below 4% for some time and are expected to remain low. These low rates will encourage more people to buy, even if they are dissuaded by initial fears caused by the virus.
3. Subprime loans are down.
The 2008 crash was set off when banks and other lenders approved an overabundance of mortgages to unqualified buyers, driving up home prices to too-high levels. When home prices began spiraling down, millions of Americans stopped making mortgage payments and lost their homes, and banks were pushed to the edge of bankruptcy.