2020 BOISE IDAHO REAL ESTATE BLOG
Yes, we are in a recession. No, there won't be a housing crash Main Treasure Valley Life

On Monday, June 8, the National Bureau of Economic Research (NBER) announced that the United States economy was in a recession. The COVID-19 pandemic and the subsequent layoffs and stay-at-home orders caused a sharp decline in economic activity. With the recession in 2008 fresh in our minds, many people are fearing that there will be another housing crisis due to this recession. 

But that won't happen this time. Here’s why.

A recession is defined as “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.”

Housing led to the 2008 financial crisis and recession but nor this recession. There are four key differences in the housing market today with this COVID-19-induced recession.

  • First, families have more equity in their homes, meaning they have better ownership of their houses and value to draw from in a home equity line of credit if money gets tight.
  • Second, there is a national housing shortage today. In 2007-2008, there was an overabundance of housing nationwide.
  • Which leads into number three: Irresponsible lending no longer exists. This was the major cause of the 2008 recession, and there are many more state and federal regulations to prevent that from happening again. This means that people’s loans are much safer and secure today.
  • Finally, home value appreciation is no longer out of control. In the years leading up to the 2008 recession, home price appreciation increased by as much as 12.5% in one year. In the last few years, home prices have increased around 5% per year (Source). This is much safer and closer to the normal appreciation of 3.6% per year.

One final good note. In only one of the last four recessions prior to 2008 did home prices decrease. In 1991, home prices dropped by 1.9%. In the other three recessions home prices increased (1980: +6.1%; 1981: 3.5%; 2001: 6.6 %). The housing market is on an upward trend. In addition, interest rates are at historic lows. If you are on the fence about buying a house, now is the time.

Give Build Idaho a call to start your home search today.

 
Posted by AndrewS at 6/12/2020 12:03:00 AM
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Michelle Penick, Boise Idaho Real Estate Agent

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Michelle Penick

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