As Florida businesses slowly start to open again and people get back to work many buyers and sellers have been asking “what should we expect in the real estate market”? Are we going to see a lot of foreclosures and short sales coming on the market in the near future? Will it be like the Great Recession that started in 2008?
Technically we are not in a recession yet (just an economic downturn), but everyone agrees by the end of June we will have our second consecutive quarter of the economy shrinking, the technical start of a recession. Something that we all need to keep in mind is that this current economic downturn is very different from what was happening in 2008. The Great Recession was triggered mostly by the bursting of the housing bubble in 2005/2006 and then the subprime mortgage crisis in 2007/2008. Remember how you could purchase a home with no money down, interest only and you were not requited to provide any documentation?! Basically we had a bunch of new homeowners with no equity and no way to improve their position as prices tanked.
In contrast, the current recession was manufactured on purpose when the government effectively shut down a large portion of our economy in order to “flatten the curve” on the pandemic. Prior to that most of the country, including South Florida, was experiencing a thriving economy and a housing market with strong fundamentals. The majority of today’s homeowners have equity in their homes and there is no reason to believe that prices will tank like they did during the Great Recession. It is reported that 1 in 4 homeowners have over 50% equity and that 37% of homeowners have no mortgage at all. Yes, we will see an increase in distressed sales, but nothing like the Great Depression.<br<
Housing related legislation will also help Americans to ride out this recession. The swift actions that the government has taken to place moratoriums on foreclosures and evictions will help Americans to stay in their homes until they get back to work and make their mortgage and rent payments again.
We do have some challenging times ahead, but again, the fundamentals of our real estate market are strong. In general inventory in South Florida is low, especially in the lower price ranges. This should help to keep prices from falling since we still have pent up demand from buyers who need to move and make housing purchases. One thing we do know is that many sellers are going to be ready ready to put their properties on the market once buyers can get out and have in-person showings with confidence again. The easing of social distancing restrictions, buyer confidence and low interest rates will get buyers back into the real estate market quickly. For now we just need to stay positive and have some more patience. Things are already starting to improve in our local market.
Stay healthy and look ahead to better days soon.
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