So everyone is asking, “what is going to happen to Real Estate”? This blog will cover what we know and what we expect during and after this crisis.
While forecasts for 2020 have been downgraded, very few economists are calling for a recession.
- Mortgage rates will likely remain low, or even fall further as a result of coronavirus.
- Domestic buyers may be discouraged by our current recession, but it’s still a good time to buy.
- Financial market volatility could reduce demand for luxury homes, but can also create potential opportunities for luxury home buyers.
- Demand from foreign home buyers could be curtailed and stifle demand for California real estate this year, but foreign buyers represented just 3.9% of California homes sales in 2019. In comparison, foreign buyers represented 8.0% of the market in California in 2008.
- New Home Construction could slow further, adding to the already short supply of homes in California.
A recession does not equal a housing crisis. For the past 5 recessions, homes values appreciated in three of them. The 2008 caused a 20% deprecation in home values, but less than 2% in 1991. We also have to keep in mind that the 2008 housing crises was not like no other and was caused by several factors that do not exists today.
The only time since 1975 that homes values have dropped significantly was 2008-2012. Interestingly, in almost every market in the country, the average appreciation including the drop in the Great Recession has averaged at least 5% per year.
For the past 10 years there has been a continued shortage of new construction. Sources say that we are 4.5 million short to just cover our current population growth. Just to compare, during the “great recession” of 2008, we were overbuilt by 2 years.
Unlike the “great recession”, our current fundamentals are solid. We don’t have the “perfect storm” we had that caused the 2008 housing crises.
- Mortgage standards are nothing like they were back in 2008.
- Prices are not soaring out of control.
- We don’t have a surplus of homes on the market. We have a shortage.
- Houses became to expensive to buy in 2008 (25.4% compare to now 15.5%).
- People are equity rich, not tapped out.
Laura Lake Real Estate Report
Get the latest on our Market
We can be confident that while we don’t know the exact impact of the virus will have on the housing market, we do know that housing isn’t the driving factor as it was in 2008.
Concerns about the global impact of COVID-19 will have on the economy are real and they are scary to many.
According to Bloomberg,
“Real Estate is one of the basic needs of mankind – food/clothing/shelter. When the quarantine is over and jobs are restored, the marketplace is going to pick up right where it left off based on the basic economical factors of supply and demand”.
Trying to time a market is hard. Overall, home prices have been very stable over the long run.
“Real Estate is not a fad product. There will always be people who need to buy or sell a home”..Laura Lake
Laura Lake Real Estate
Get Information on Buying or Selling a Home