11
HOUSING:
BRACED FOR
RECESSION?
Housing has been a casualty of the current
economic crisis, and not a cause, but a bubble
may still be on the way according to some
experts. According to Economic Analyst Jesse
Colombo in Forbes, the coronavirus pandemic
may act like a "pin" to burst the housing
bubble that has been brewing over the past
several months.
"As in the last housing bubble, all sorts of
shenanigans has occurred during the making
of U.S. Housing Bubble 2.0," Colombo
said. "Of course, it's not shenanigans that is
identical to the last housing bubble—'history
doesn't repeat, it rhymes … lightning doesn't
strike the same place twice, etc.' One form of
shenanigans that occurred during Housing
Bubble 2.0 is the fact that many AirBnB
'super-hosts' bought scores of properties with
cheap mortgages for the purposes of renting
out."
Mark Fleming, Chief Economist at First
American, also notes that the housing market
is not immune to the coronavirus impact,
but states that the market may be in a better
position than many believe. According to
Fleming, while housing led the recession in
2008–2009, "this time it may be poised to
bring us out of it."
Fleming points to three factors that
make this downturn different than pre-Great
Recession:
» e housing market is not overvalued
» e housing market is underbuilt
» Equity is at historical highs
As Fleming notes, house-buying power is
now nearly twice as high as the median sale
price of home, implying that housing is not
overvalued, and is in fact in a much better
position entering this potential recession
than it was ahead of the last. Additionally,
the limited supply of homes positions the
housing market to lead the recovery, once the
impact from the coronavirus outbreak fades.
Homeowners today have very high levels of
tappable home equity, providing a cushion to
withstand potential price declines.
Journal
