While the current health crisis is unprecedented, the housing market is surprisingly predictable. Research shows that over the past 40 years, the U.S. housing industry — and home prices — have been fairly resistant to recessions caused by everything from world wars to natural disasters. If you’re feeling a little anxious about the state of real estate, here are some things to keep in mind.
1. Single-Family Homes Are Always on the Rise
According to the Federal Housing Finance Agency (FHFA) House Price Index (HPI), single-family home prices typically rise an average of 7.4% leading up to a recession and continue to rise by an average 2.7% during an economic downturn. The only exception was the Great Recession, which was partly caused by weakness in the housing sector and over-leveraging in the financial sector. Since those industries entered this new recession in strong shape, it’s unlikely we’ll see another exception to the HPI rule.
2. Lower Supply Means Sturdier Prices
Due to the loss of construction capacity coming out of the Great Recession, 2 million to 3 million fewer single-family homes have been added to the market over the last 10 years. This low level of sales inventory has driven the strong price appreciation we’ve seen up until early this year, and will continue to keep prices stable until the market recovers. And, if the market recovers quickly, the reduced supply may help us avoid widespread price decreases.
3. We Are Always Here for You
As your agent, it is part of our fiduciary duty to keep you updated on the state of real estate in your area. Whether you want to know what’s new in the local housing market or when you can go to an open house again, we will do everything in our power to provide you the information you’re looking for as fast as possible.