How to Make Informed Housing Decisions During COVID-19

TL;DR

The key to navigating the current housing market is understanding that this is a health crisis that evolved into an economic one, not a housing crisis like 2008. Current data from major financial institutions suggests a potential V-shaped recovery. Real estate professionals should focus on being informed and communicating effectively with clients to help them make the best decisions during and after the pandemic.

Transcript

welcome everybody happy april 17th it's Friday nearly one o'clock here in the West welcome to the fifth week of this week in housing I'm Tom ferry I've got my two great guests Steve Hardy aka the Oracle and David Childers the man with the numbers and all the great slides that are helping each and every one of us educate our buyers and sellers to ma... Read More

Key Insights

• This is not a repeat of the 2008 housing crisis; it's a health crisis with economic repercussions.
• Home price appreciation today is more stable compared to the runaway appreciation before 2008.
• Credit availability is much stricter now than it was before the 2008 crash, reducing risk.
• Current housing inventory is low, unlike the oversupply seen in 2008, supporting prices.
• Home equity is strong, with many homeowners having significant equity, reducing foreclosure risk.
• Unemployment is projected to be severe but short-lived, unlike the prolonged unemployment of the Great Recession.
• Major financial institutions predict a V-shaped economic recovery, suggesting a rapid rebound.
• Real estate professionals should focus on educating clients and preparing for a post-COVID-19 market.

Questions & Answers

Q: How is the current housing market different from 2008?

The current housing market differs from 2008 in several ways. Home price appreciation is more stable, credit availability is stricter, and housing inventory is lower. These factors, combined with strong home equity positions, suggest a more resilient market. Unlike 2008, the current crisis is driven by health concerns, not housing market fundamentals.

Q: What is the expected recovery shape for the economy?

The expected shape of the economic recovery is a V-shape, according to major financial institutions like Goldman Sachs and JP Morgan. This suggests a sharp decline followed by a rapid rebound as the health crisis subsides and economic activities resume. This projection relies on effective virus control and gradual reopening of the economy.

Q: Why is home equity important in the current market?

Home equity is crucial because it provides homeowners with financial stability and reduces the risk of foreclosure. In the current market, a significant portion of homeowners have substantial equity, which acts as a buffer against market fluctuations. This contrasts with 2008 when many homeowners were over-leveraged, leading to widespread foreclosures.

Q: What role does inventory play in the housing market?

Inventory plays a critical role in determining housing market dynamics. Currently, inventory levels are low, which supports home prices despite economic challenges. In 2008, an oversupply of homes contributed to falling prices. The current low inventory levels suggest that the market is less likely to experience a similar downturn.

Q: How can real estate professionals help clients during COVID-19?

Real estate professionals can help clients by providing accurate, up-to-date information about the market. They should focus on educating clients about the differences between the current situation and 2008, highlighting factors like stable home prices and strong equity positions. Professionals should also use technology to maintain communication and prepare clients for post-COVID-19 opportunities.

Q: What are the challenges with appraisals in the current market?

Appraisals can be challenging due to changes in how they are conducted, such as drive-by appraisals instead of traditional methods. Additionally, fluctuations in market activity and expectations can lead to discrepancies between appraisal values and homeowner expectations. Understanding local market conditions and trends can help navigate these challenges.

Q: How should agents prepare for the post-COVID-19 market?

Agents should prepare for the post-COVID-19 market by staying informed about local and national trends, maintaining strong client relationships, and leveraging technology for virtual interactions. They should focus on building trust and providing valuable insights to clients, positioning themselves as knowledgeable advisors ready to help clients navigate future opportunities.

Q: What impact does unemployment have on the housing market?

Unemployment impacts the housing market by affecting consumer confidence and purchasing power. However, the current unemployment spike is expected to be short-lived, with a rapid recovery as the economy reopens. This contrasts with the prolonged unemployment seen in the Great Recession, suggesting that the housing market may be more resilient this time.

Summary & Key Takeaways

• The current economic situation is a health crisis turned economic crisis, not a housing crisis. Unlike 2008, home price appreciation is stable, credit is stricter, and inventory is low. Homeowners have significant equity, reducing foreclosure risk. Unemployment is severe but expected to be short-lived, with a V-shaped recovery projected by major financial institutions.

• Real estate professionals should focus on being informed and communicating effectively with clients. They should prepare for a post-COVID-19 market by understanding local data and trends. Educating clients with accurate information will help them make informed decisions and maintain trust.

• The housing market is not collapsing like in 2008. Instead, it faces challenges due to the pandemic. Professionals should leverage technology to stay connected with clients and provide valuable insights. By doing so, they can help clients navigate the current market and prepare for future opportunities.