Not All Recessions Are Created Equal

The real estate climate is currently in a state of rapidly rising prices, while in the midst of a recession. Some people are having flashbacks to the Great Recession of 2007 and fearing a housing bubble and imminent crash. But there are some important factors that make this nightmare not a likely reality.

Leading up to 2007, there was an overabundance of supply due to high rates of construction. Loose lending practices were the trigger, as they resulted in mass foreclosures and subsequent drop in demand, making sellers who were liable for foreclosure unable to find buyers to get them out of their hole. This is the opposite of what’s happening now. Supply is incredibly low due to a lack of construction, and buyers are facing cutthroat competition. There are no foreclosures happening right now because of the foreclosure moratorium. Even when the moratorium ends, the number at risk of foreclosure is much lower.

In some ways the real estate market is actually a strong point of the current economy, despite the recession. So a housing bubble isn’t to be expected. But that doesn’t mean we’re out of the water; the recession still exists. And it’s not going away until job recovery happens, which isn’t expected until 2024-2025.

Photo by M. B. M. on Unsplash

More: https://journal.firsttuesday.us/pricing-crash-or-near-miss-the-factors-different-from-the-last-recession/77815/

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