Real Estate Recession? Not so fast!

Рецессия на рынке недвижимости? Как бы не так!
10 April 2020 Angelica Michael

Ingo Winzer, the writer on the American Forbes, believes that the recession in the Real Estate Market would look like the 2008 crisis, but faster, deeper and shorter, within a few weeks (or months), and a significant decrease in prices of Real Estate in not expected.

In fact, the virus will peak anytime soon (in a matter of weeks, months?). After the peak is reached and the number of infected will fall, the business will gradually begin to function in the same level as before, and people will continue to invest in real estate.

Analyzing the crisis of 2008, the author of the article pays attention to the fact that the drop-in retail sales maxed out at 12% and the loss in jobs at 5% in the USA. People started buying things again at the end of 2009 even though jobs had not yet recovered.

Retail Sales and Jobs during the 2008 Recession 

Рецессия на рынке недвижимости? Как бы не так!

Predictingthe further situation in the Real Estate market in 2020 by analogy with the previous crisis, the author of the article anticipated sales drop 20% and job losses – 10% (16 millions in the USA).

With government help a recovery can start soon after the virus has peaked, although nothing will be over by the end of the year. The economy is not built for a quick bounce back to normal. Even a compressed recession will have a drawn-out fairly modest recovery going deep into next year.

In 2008 recession was a catastrophe for real estate. The prices in some local markets dropper 50% or more. If you bought a home or invest in a rental you lost your shirt.

Why is a compressed recession important for Real Estate? Because they we will not have large numbers of people forces to sell their houses.

The recession will bring the price bubbles to an end, with maybe a drop in home prices in some markets of 10% over the next few years. But prices in most local markets will at worst be flat.

Also, the author predicts that the Real Estate, and especially rentals, will be a dynamic area for development and investing. This has nothing to do with buying property cheap but rather with investing more wisely and precisely. 

Source: Forbes
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