12
RECESSION
VERSUS
DEPRESSION:
HOUSING
IMPACT
As COVID-19 has brought many
businesses to a halt, Realtor.com asks if the
economic impact has led to a recession or a
depression, and examines how these outcomes
would impact housing.
"is current situation is unique. ere's
no doubt that the economy has stopped
growing, at least temporarily," Realtor.com
Chief Economist Danielle Hale said. "It's
an open question as to how long this will
continue, and that could affect whether or not
they call this time a recession. e severity of
the decline could affect what they call this,
too."
As Realtor.com noted, economists are
hopeful that the federal stimulus checks and
small-business loans, a proactive Federal
Reserve, which slashed short-term interest
rates to between 0% and 0.25%, and mortgage
forbearance will help to stave off utter disaster
and help the economy to recover faster.
Unlike the Great Recession, the housing
market isn't to blame for the downturn
this time, but real estate may not escape
unscathed. Fewer homes will be sold until the
economy picks back up, and many sellers have
pulled their homes off the market
"In a normal recession, sellers will try
to wait it out," Hale said. "e number of
listings fall as folks wait until the economy
improves and they can score top dollar for
their properties. Only people who have to sell
will choose to sell."
If this turns out to be more like a
depression, prices will likely come down
further and there will be fewer home sales.
"If this turns into a more prolonged
downturn, I don't think it will change the
desire for people to buy homes," Hale said.
"But it will make it more difficult for them to
make that a reality."
If the high unemployment rate
continues, the U.S. could see another wave of
foreclosures, even with forbearance programs
in place. Additionally, while Hale believes if
the nation's reopening goes well, the economy
could improve by the summer, another surge
in COVID-19 cases would change our course.
Journal
