Recession Alert: What Home Buyers and Sellers Need To Know About the Housing Market

Last year, there were fears that a trade war with China or the fallout from Brexit could torpedo the strong U.S. economy. Instead, it was the unforeseen force of COVID-19, caused by a new strain of coronavirus, that has led the president of the United States to declare a national emergency and made a global recession seem all too possible.

As flights are canceled, school suspended, and professional sports put on ice around the world amid the deadly pandemic. An economic slowdown appears inevitable. That’s terrifying to those whose memories of the Great Recession are still fresh. But many housing and financial experts believe this looming downturn—which may not even devolve into a full-blown recession. May not be as painful as the last.

“I don’t expect the slowdown to be like the last recession where prices fell,” says realtor.com® Chief Economist Danielle Hale. “There are more than enough buyers out there to keep home sales from slowing in any major way.”

While it doesn’t look like it will be business as usual anytime soon. Home prices aren’t expected to fall off a cliff and low mortgage rates may help buy home sales. At least that’s what experts are saying this week. But this is a fast-moving, unprecedented crisis, and no one knows yet how it will all play out.

While there will likely be layoffs, many economists don’t expect them to be widespread. But rather concentrated in industries such as tourism and hospitality. If employment stays high, most folks will be able to make their monthly mortgage payments and hold on to their homes. Subprime loans, which helped to tank the economy in the past decade, have largely ceased to exist today. As credit requirements for loans got much stricter after the housing bust. Plus, home prices have risen so much in the past few years that most owners have substantial equity in their properties. So they’re much less likely to find themselves underwater on their mortgages.

“It will be different than the Great Recession. Things unraveled pretty quickly, and then the recovery was pretty slow,” says Hale. “I would expect this to be milder. There’s no dysfunction in the banking system, we don’t have [many] households who are overleveraged [with their mortgage payments] and are potentially in trouble.”

By Clare Trapasso | Mar 13, 2020