Why This is NOT the Housing Crash of 2008
July 8, 2020
As the coronavirus pandemic destroys the stock market and shuts down the global economy, American homeowners and realtors are afraid of returning to a housing market crash akin to that which occurred in 2008. Fortunately, there’s no need to fear. The real estate market will recover relatively quickly after the pandemic passes. Read on to find out why.
WHAT IS A RECESSION?
To fully appreciate the difference between 2008 and now, you must understand what a recession is. A recession is a period of severe economic decline, where unemployment rises, and the stock and housing markets decline. That may not relax you at all, knowing that’s what’s unfolding now. Still, take comfort in knowing that the housing market is much stronger than it was back in 2008.
WHAT HAPPENED IN 2008?
The core of the economic problem we’re facing now is fundamentally different than what we faced in 2008. Then, a crisis in the banking industry and a general loss of wealth within the housing and real estate industry led to the market crash. Now, the loss is in the public’s income.
WHY IT WON’T HAPPEN AGAIN
In the latter half of 2007, housing prices were falling across the country, leading to a reduction in housing construction and slow in consumer spending. Quite the opposite is true today, shown by the 1.4% increase (13.2%, annually) in home purchasing power from December to January and a 2.3% rise in the median household income from 2019.
The numbers tell us to take a breath and relax. The year 2019 showed us that the housing market and national economy were on their way to recovery after a tumultuous experience with the President’s trade war.
The reality is, yes, we’re going to struggle for a bit as household incomes run dry as long as quarantine orders are in place. But, once everyone is able to get back to work and regain a steady flow of income, statistics of the recent growth in the housing market show us that the industry will be back on its feet in no time.