In the financial recession of 2008, many real estate markets across the country saw home values plunge for years. Some markets have yet to recover fully from that crash. This year, the coronavirus-led recession is very different; home values are holding steady, and even increasing in some markets.
In the years before the 2008 recession, many homeowners across the country took out mortgages they couldn’t afford. As a result, home values far outpaced income in many areas. Wall Street acted just as rashly, creating securitized pools of mortgages and believing they would never fail. The resulting recession wiped out untold amounts of equity, and home prices fell dramatically – 50% in some markets.
This year, that kind of price drop is incredibly unlikely. Wages have grown alongside home values for years. Mortgage debt is sustainable relative to household income. Even with many businesses closed, we haven’t seen a huge drop in real estate values nationally like in 2008. With a more fundamentally strong market this year, real estate should weather the virus just fine.