The housing market is set to remain a bright spot in the face of a possible recession caused by the COVID-19 pandemic, according to Redfin. Because the housing market was strong going into the 2020 recession, there’s currently no reason to expect a major crash in home prices, Redfin notes. As Redfin states, the driving factors for this 2020 recession are unrelated to real estate, which is just one of the reasons at this time we believe fallout in the U.S. real estate market will be mild, and nowhere near the catastrophe of the 2008 Great Recession.
“The housing market came into this turmoil in a strong position, with a very low supply of homes for sale and record levels of home equity,” said Redfin Lead Economist Taylor Marr. “Home equity can function as a rainy day fund. Homeowners can weather a storm of falling home values without the pressure to walk away from their home. They can also better handle a loss of income if they can tap into their equity with a home equity line of credit (HELOC). This stabilizes the market, preventing an influx of supply from foreclosures, which would further cause prices to fall in a vicious cycle. Additional government support provided through the stimulus bill CARES Act and a moratorium on foreclosures can also prevent a falling out during this pandemic.”
Affordable cities on the East Coast and in the Midwest are at the lowest economic risk, while Los Angeles, Miami, and San Diego have the highest risk, based on a late March 2020 analysis by Redfin economists.
Those that are hit the hardest overall are also likely to be more at risk of a real estate downturn.
“Some cities have factors that make them more susceptible to losing their footing and are likely to be hard hit,” continued Marr. “Amidst rapidly rising layoffs, it will be especially difficult to sell a home in these markets, and yet buyers will likely find limited options as sellers delay listing, leaving the housing market in a standstill. Federal support will help cushion the fall, but in these areas it will take significantly longer to recover.”