Is a Repeat of the 2008 Housing Crisis Looming?
Home is where the heart is.
Suddenly, within a few short weeks, that saying has taken on a completely different meaning. Home is where my life is.
The coronavirus pandemic has glued most of us to our phones, whether fearful or frustrated, to learn of the next update, the next breaking news.
It’s a surreal world that feels all too apocalyptic at times. Drive around and you’ll see restaurant parking lots empty except for the bright orange cones for outside pick-up. Entire strip malls look back at you midday with blank stares and darkened windows. Stores have been completely cleared out of webcams, not to mention paper products. Pass a walker too closely on the sidewalk and you’ll get a suspicious glare. Grocery shoppers dutifully line their feet up on the marked spots 6 ft. apart. Cable and internet companies work tirelessly to improve their infrastructure, weighted down by the increased usage. School speed zones need not be heeded. Playgrounds are wrapped with caution tape. Family members wave high to grandparents from outside the window.
And the one and only place where everyone in the entire nation suddenly feels safe…is home.
But how does this current pandemic affect our homes? Will the economic impacts that are likely to follow cause a domino effect that plummets the housing market into another crisis like 2008? Will our home values rapidly decrease as the stock market has done? What if we need to sell soon? Will we have to simply count our losses and walk away?
All valid questions. For many, their home is the most valuable asset they have and often seen as a rock-solid investment. But if the past month has caused you to question that, there are some things you need to know.
- Housing prices do not often mirror the stock market.
- The economy is still operating from a place of strength.
- This economic downturn is very different than the 2008 market-crash.
1. The housing market doesn’t mirror the stock market.
The stock market often acts as a thermometer for the collective emotions of millions of people. Emotions never rise and fall in a gentle, gradual slope. They are volatile and sensitive, with drastic ups and downs. As can be the stock market.
Granted, a healthy stock market will always recover, much like a healthy person. Many millionaires have been made through stocks, so when handled wisely, it’s still a solid investment choice. But it doesn’t negate the fact that the virus has caused wild swings, indicative of emotional upheaval.
The housing market doesn’t follow suit. This may be partly due to the fact that it’s much harder to offload a house than it is a share of a stock. Emotions have the chance to level out and once again achieve stasis before a rash decision has been made.
But regardless of the reason, historically, home prices don’t have drastic ups and downs in tandem with the stock market. While they still have movement one way or the other, it’s gradual. You need not fear that your home will lose 30% of its value overnight.
2. The economy is still operating from a place of strength.
Just months ago, the unemployment rate was one of the lowest it’s been in years, household income had risen 0.6% in January, and at the end of 2019, consumer spending still showed a steady increase.
While this pandemic has already had devastating economic effects for millions of Americans, the economy as a whole is operating from a place of strength. We realize that much of the speed of recovery will depend upon the length of shutdowns, but economists also have confidence that we will recover…and soon.
3. This economic downturn is very different than the 2008 housing market crash.
First and foremost, the housing market itself stands on solid fundamentals now as compared to the past. Lenders and borrowers alike learned hard lessons during the 2007 – 2009 financial crisis. Those lessons have built the strong foundation that currently supports the housing market nationwide. Over a decade ago, lenders handed out subprime mortgages like candy at the St. Patty’s Day Parade. Now, solid financing credentials back all mortgages.
In 2008, builders were overproducing homes in droves. Now, an inventory shortage defines the market. This drives strong demand and even stronger prices, making everyone’s investment more risk-proof. While some bemoan the shortage that gives way to competitive conditions, that shortage will still be there when the shutdowns have lifted. And the resulting competition keeps the market strong.
In the short-term, the coronavirus has provided buyers the chance to breathe and regroup in the midst of their home search. Real estate buying and selling is still considered an essential business. It’s true that many have chosen to pause their home search for the time-being, but this has left open opportunities to the brave (yet cautious) ones willing to stay active in their home search.
And while home searches still progress, real estate agents have been happy to turn to digital means to support social distancing.
Our Efforts During the Crisis
At Krakofsky Team Realty, we haven’t slowed down. Well, maybe for the temporary hand-sanitizer or mask protection. But we’ve enjoyed the challenge to turn more towards digital means for the health and safety of our clients and families.
The term “curbside closings” barely existed 3 months ago, but it’s now part of our COVID-19 relief language. We are here for you, whether you prefer to sit it out and use this time to gather information and possibilities, or you’re ready to take full advantage of the unique market the coronavirus pandemic has created.
Either way, it’s exciting to see the positive changes that have grown, as if overnight, from this crisis. Compassion, care, ingenuity, flexibility, giving, understanding, support and changed perspectives – we’ve seen all of it among the people in Colorado Springs that we work with, live with and serve. And we’re proud to be a part of it.
“In many ways, this could be our finest hour.” -Brian Buffini