The world is navigating through unprecedented times, and the volatility of the stock market and the uncertainty surrounding the COVID-19 pandemic is causing home buyers and sellers to wonder if the housing market is headed towards a crash, reminiscent of 2006-2008.
As economists are predicting a recession is imminent as the result of the pullback in the economy caused by COVID-19, this does not equate to a housing crisis. While no one knows with certainty how long the pandemic will last, the hope is that it will resolve sometime over the next several months and experts agree that when it does, the economy will regain its strength quickly.
A Recession Does Not Mean A Housing Crisis
This is not the same housing market that we experienced over a decade ago. A recession does not equal a housing crisis or “crash” as we saw in 2008. A recession doesn’t even mean that home prices will depreciate. (Source: Keeping Current Matters)
If you look at the graph below, you’ll see that in the five most recent recessions, only two of them saw values decline:
Housing Isn’t The Driver For A Recession
The stock market has caused fear and uncertainty for many, however, if you’re considering buying or selling a home, take the time to educate yourself to make informed decisions based on the long run, specific to your situation and goals. Interest rates are hovering at the lowest levels in the history of the housing market making it an attractive time to buy and lock-in at a great rate.
Reacting to the growing demand- and supply-side impacts of the coronavirus, the Federal Reserve FOMC today reduced the target range for the federal funds rate by 50 basis points, lowering the target to 1 1/4 and 1 percent.
The Fed’s action was expected but perhaps not to this degree and timing. And the policy change was consistent with recent declines for interest rates in the bond market. These declines should push mortgage interest rates closer to a low 3% average for the 30-year fixed-rate mortgage.
Concerns about a recession are real, but housing isn’t the driver. Everyone needs someplace to live, as noted in the New York Times:
Many people who are considering buying now may be swayed by other benefits of homeownership: control and certainty. You get a stable monthly housing payment — and rock-bottom interest rates might mean you never even have to refinance — plus the comfort of knowing the place is yours as long as you make that payment.
Are We In A Buyers Or Sellers Market?
In short, we sort of experiencing both. Buyers AND sellers have opportunities in this current climate:
With a new ‘normal’ for selling homes digitally (in-person open houses and showings are out, and inspections and appraisals may take longer to schedule), sellers facing weeks or months of uncertainty might start cutting prices. The Federal Reserve’s decision to lower interest rates creates an unprecedented opportunity for buyers to lock in mortgages at phenomenally low rates now. Low rates and seller uncertainty will favor buyers.
It’s spring sales season; inventories that are already low will shrink even more. Short inventories will keep upward pressure on prices. The super-low rates will motivate a flood of buyers to buy now. More buyers and shorter inventories will help sellers.
(Source: Inman News)
Home Buying And Selling In Central Oregon
While we may not know what the future holds, if you are pausing on buying or selling a home because you think a recession will cause another housing crisis, remember they’re not the same thing.
If you have questions or would like to discuss your family’s home buying or selling goals, we are open for business and we’d love the opportunity to assist. Our team of 100+ local real estate professionals are informed with market movement and trends and are equipped with digital tools for our buyer and seller clients during this climate, and beyond.
Get in touch via the form below and we’ll follow-up promptly to answer questions specific to your personal situation and our Central Oregon real estate market: