Is a Recession Here? Yes. Housing Crash? No.

The National Bureau of Economic Research (NBER) announced on Monday that the United States economy is in a recession. A recession is defined as:

“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”

The COVID-19 pandemic shutdown caused a “significant decline in economic activity.”

The announcement of the recession will understandably cause many Americans to be afraid as it is natural to remember the tremendous impact of the last recession.

One important thing to keep in mind is that our real estate market is in a completely different place then a decade ago.

Mark Fleming, Chief Economist at First American, states:

“Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But, there are distinct differences that indicate the housing market may follow a much different path. While housing led the recession in 2008-2009, this time it may be poised to bring us out of it.”

As compared to the last recession, there are 4 major differences in the real estate market today:

  1. Homeowners have large amount of equity in their home
  2. Currently there is a shortage of housing inventory, not an overabundance
  3. Lending is no longer irresponsible
  4. Home price appreciation is not out of control

Although our past has scarred us, it is important to realize that recession doesn’t equal housing crash. Home values increased in 3 out of the 4 recessions prior to 2008. In the 4th recession, prices depreciated by 1.9% only.

Bottom Line

The US economy is in a recession. The housing industry is much stronger than in 2008 and will likely bring the economy out of recession. Thinking of becoming a homeowner? Call the South Florida Real Estate Experts at Prestige Waterfront Realty by calling 954-830-7000.

Are you wondering if you can get pre-approved for a mortgage? Call Mortgage Broker Iliana Tegov at 954-830-7000 NMLS 1308941 Voget Financial Services. Currently there is a program for homebuyers purchasing their primary property. Rates are as low as 2.5%-3.0%.

To show you the how much rates affect you – see below.

Same monthly payment $1,347.00 per month. 3.5% rate $300,000 purchasing power. If the rate is 4.25% you maximum purchase price would be $274,000. That’s $26,160 higher purchase power just because of the lower interest rate. This is a historical time and everyone thinking of buying should take advantage. Let’s connect today.

Leave a Reply

Your email address will not be published.