Why 2020 Did Not Become Another 2008
When the pandemic sent the country into lockdown in early March, many sensed the beginning of another financial crisis similar to the 2008 recession that decimated the housing market. Now, well into February, it’s clear that the pandemic was not the great harbinger of doom to the real estate and mortgage market that many predicted. In fact, real estate has been as strong as ever in 2020, leaving many to ponder how exactly this market has been so resilient, and why 2008 didn’t happen all over again.
Dr. Lawrence Yun, Chief Economist for the National Association of Realtors, was asked the very same question. He says two things are very different now than in 2008: no subprime lenders, and housing inventory. “We didn’t have subprime lending that just gave mortgages to anyone. We have sound underwriting, with people staying within budget. And back in 2007, home builders were wild, building right and left, with over ten months of supply. But in 2020, we had undersupply, and we actually needed more home building, yet the builders were still somewhat hesitant about how fast to build.”
It’s clear that 2020 has not been a rerun of 2008, and is indeed poised to finish strong, with Q3 and Q4 posting a 20% increase in home sales as compared to 2019. Home prices are also expected to finish up 7 to 9% compared to 2019 (NAR). As surprising as it may seem, the real estate market may end up as the economic hero of a wildly unpredictable 2020.