The US dollar is considered one the most robust currencies in the world. Due to the pandemic, the US government announced an enormous nationwide stimulus package and infused $2 trillion in the market to provide liquidity. The COVID-19 pandemic has caused such far-reaching damage, it is impossible to predict what the long term effects will be. However, due to the similar status of the economy, we reexamine the 2008 recession to gain instight of what the future real estate market will look like. A comparative view of 2008 and 2020 can help you conceptualize the reality of today.
A comparative outlook of 2008 VS 2020 real estate sector by Gary Saitowitz
The real estate market spun out of control from 2008 to 2012. However, experts say that the signs had started showing up as early as the 1990s. The National Association of Real Estate Agents points out that the home prices increased by double in 2006 before declining in 2008. People took out high interest loans to buy properties and later defaulted. It generated home construction demand, but when homeowners couldn’t pay and the demand diminished, a collapse was inevitable. . The small business incentives also paved the way for new constructions.
During this recession period, there were no government incentives to support families with mortgage installments and other expenses. Consequently, institutions started offering easy loans to families to boost sales. The combination of these factors set the stage for the financial disaster of 2008 to 2012.
If you look at the current situation caused by COVID-19, you will notice that there has been a consistent price increase for homes. However, they are just 22% higher than the peak. Entrepreneurs like Gary Saitowitz opine that strong credit rules and low loan rates can empower the housing market to balance the problems faced by other parts of the economy. Thus, though the economy is suffering from millions of people losing their jobs, the future does not look as bleak as it did in 2008-2012.
The scenario of the real estate market in 2020
There is a supply and demand gap in the housing sector. Over one million American homes are constructed each year, and about 300,000-400,000 existing houses get demolished. Though the future of new property construction is not promising, foreclosed homes and repaired properties present an opportunity. How? The government has promised the disbursal of substantial financial aid to people and small businesses to support them either by providing money or forgiving small business.
Thus, if you are a real estate investor, you can get rid of speculative investments, invest in affordable housing or second-hand homes, and patiently wait for the right time to reap the fruits of your investment to be safe with your money.