After the World Health Organization declared COVID-19 a pandemic this week, we’ve seen the major stock indices drop dramatically, large gatherings and events canceled including our beloved river dyeing, and stores hit with “panic buying.” However, we have yet to see an impact on the real estate market. Interest rates are still at historic lows (have you refinanced yet?) and none of our deals have fallen apart due to panicked buyers.
While stock markets are in turmoil I thought it would be helpful to share some information. Other than the most recent banking & housing recession real estate has fared well through past recessions. In fact, real estate is seen as a safe haven to weather the storm in other financial markets.
“Other than during the GFC (Great Financial Crisis), home prices have kept rising even during recessions, probably because rates fall, the vast majority of people retained jobs and household formation continues,” said Thomas J. Thornton, Jefferies’ head of U.S. equity product management, in the note to clients Saturday.
“This could be a particularly big cycle for household formation owing to the millennials,” he added.
A recession is defined by two consecutive quarters of declines in GDP. We aren’t there! It’s only been a few weeks since markets have started to decline due to coronavirus. China’s impact has all but halted and many are hoping with warmer weather in the coming weeks/month the virus spread will slow.
Today’s housing market is not fueled by highly leveraged homeowners like in 2008 where you could get a loan without income verification! Lending guidelines require ample down payments and good debt-to-income ratios. Homeowners have good equity in their homes and have options in the event of an economic decline (tapping into their equity, sell if necessary without taking a loss).
So, we are open for business and business is strong! No need for fear in real estate or letting this affect your homeownership goals in 2020. If anything, take advantage of these incredible rates!
Call, text, or email me to discuss this topic or any other!
Don’t be a stranger.
Mike