2020 Into Recession? Yes. Housing Crash Crisis? No

    2020 Into Recession? Yes. Housing Crash Crisis? No

    Apr 17, 2020

    Did you know that 90% or more Americans are locked down in a shelter-in-place order right now? The economy is in a recession, or at least heading into one.

    So how does this affect the Wisconsin real estate market?

    Let us first see what is a recession really is first.

    According to the National Bureau of Economic Research:

    “A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

    The economy was forced to pause in the middle of March due to COVID-19.

    COVID-19 hit the pause button on the American economy in the middle of March. Morgan Stanley, JP Morgan, and Goldman Sachs are all calling for a deep dive in the economy in the second quarter. According to the definition of recession, we are not quite there yet. Down the road, history will tell us that we were in one.

    So is another housing crash coming?

    You will hear many people talk about the housing crash that occurred during the Great Recession of 2006-2008 on the news, in newspapers, and all over the internet. However, as in my prior articles, history shows us that most recessions do not adversely impact home values.

    Doug Brien, CEO of Mynd Property Management, also explains:

    “With the exception of two recessions, the Great Recession from 2007-2009, & the Gulf War recession from 1990-1991, no other recessions have impacted the U.S. housing market, according to Freddie Mac Home Price Index data collected from 1975 to 2018.”

    In a second study, CoreLogic’s research found the same. Check out a graph of their findings below:

    So what are the experts saying about this time?

    Three economic leaders; Robert Dietz, Chief Economist with NAHB; Ali Wolf, Chief Economist with Meyers Research; and John Burns, founder of John Burns Consulting had statements about the recession and housing connection:    

    “The housing sector enters this recession underbuilt rather than overbuilt…That means as the economy rebounds - which it will at some stage - housing is set to help lead the way out.” ~ Robert Dietz, Chief Economist with NAHB

    “Last time housing led the recession…This time it’s poised to bring us out. This is the Great Recession for leisure, hospitality, trade and transportation in that this recession will feel as bad as the Great Recession did to housing.”

    ~ Ali Wolf, Chief Economist with Meyers Research

    “Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).” ~ John Burns, founder of John Burns Consulting.

     As you can see, his firm’s research also concluded that home values are not usually significantly impacted by recessions caused by pandemics.

    So What are the Main Points?

    Well, if we’re not in a recession yet, we’re about to be in one. The difference is that this time, the economic recovery will be led by the housing sector!

    Stay healthy and safe out there my friends,

    ~ Steven RedBeard Vertz, the Largest Beard in Real Estate.

    WizardofRealEstate.com

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