How to survive & thrive during a potential real estate recession: Part 2
The real estate question everyone wants answered right now: will the coronavirus crisis cause housing prices to crash?
In Part 1, I focused on what impact coronavirus is having on China's real estate values.
Today in Part 2, I'm diving into past recessions and past pandemics. Did you know that during some recessions the price of housing actually went up?
And yet as of this writing, in our market here in New Jersey, housing prices are already forecast for a 12% dip. Analysts are recommending a 20% listing price discount for a quick sale.
During the 2008 recession, home prices in some markets dropped by as much as 50%. But during the 2001 dot-com bust, housing prices actually increased.
Here's a breakdown of home price behavior in past recessions:
What about in a pandemic?
Zillow conducted a study that found during the Spanish flu outbreak of 1918 and during SARS in 2003, the United States took a sharp hit to economic activity or about 5-10%. But the economy did snap back when the epidemic ended. Home buying volume fell significantly, but home prices did not suffer much. For example, during SARS, real estate prices in Hong Kong fell less than 2%.
Simply put, history shows us that epidemics simply put the housing market on pause.
And as of this writing, we are seeing that same pattern play out in China and the United States... so far.
We are still in the 'wait and see' zone. It's hard to see where housing prices are headed when there are so few transactions happening right now.
Currently, the number of new listings in the coronavirus hot zone (New York, New Jersey) have dropped by almost 70%. We'll be watching where prices go from here.
It is a real possibility that cash-strapped homeowners could flood the market with discounted homes.
Next, I will share our buying strategy during a downturn:
- How deeply discounted properties must be for us to buy right now;
- and what types of real estate we will look to invest in during this market shift.
The biggest gains can be made at the start of a new market cycle. So learning as much as you can about what is happening right now is key.
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