Hi. There's a lot of talk, a lot of
confusion, a lot of concern about what
happens to housing prices during a
recession. But I want to cover some
information with you today on that, so
stick around.
Hi, I'm Stewart Ebaugh. a real estate agent with Southern Classic Realtors in the
Atlanta area. And of course with what's
going on with the coronavirus pandemic,
with these crazy times, huge  unemployment right now, I want to share some
information with you on what happens
with home prices during a recession.
But first of all, so we can get this
message out to as many people as
possible, give this video a Like, leave me
a comment, share with your friends, and
that'll help the algorithm get the
message out to to as many people as we
can. So if we look back at the last five
recessions, we can see that home prices
actually increased during three of those
five. with the huge price drop during the 2008
recession as we're are all familiar with. If
we look at the 2000 to 2002, the dot com
crash, along with the post 9/11 recession,
we can also see that home prices
increased in the eight percent range
then as well. So if we look back to 2008
on what happened then and why the market now is not what it was then I think that
will put some of it in perspective for
us. So we can see that the home prices
were appreciating kind of steadily in the
eight percent range and then we had a
huge spike 2004-2005, builders were just
building like crazy, lots of homes coming
on the market. It was the old, "if you build it,
they will come" type of scenario.
If we look at this chart of what's
called the mortgage credit availability
index, which is just a fancy name for how
hard or how easy is it to get a loan, we
can see that leading into the crash or
prior to the crash all you had to do is
fog a mirror to be able to get a
mortgage. And of course we know what
happened from that and so now it's been
much more difficult, the lending
standards have tightened considerably and have been about the same since then.
And if we look at the months of supply of
housing inventory, six to seven months is
about a normal market. Below that, which
is what we're in now, is a seller's market,
some places two or only three months
of supply of inventory, houses are
selling very quickly, there's a lot
more buyers then there are houses for
them so prices are going up, homes sell
quickly, the sellers can get what they
want, in many cases above their asking price.
And the reverse is true in a buyers
market. So we can see how leading into
the, hello birds, we can see that leading into the end of the crash, just the supply of
inventory was through the roof and the
oversupply of houses which of course now
prices have to come down in order to get
them sold. So if it's a seller's market,
home prices are going up why would a
recession now not be like it was in 2008?
Well if we look here, we can see that 37
percent of homeowners own their own home
free and clear. Their house is not going
into foreclosure no matter what happens.
And 27 percent of homeowners have over
50 percent equity in their house so
they're not likely to walk away from all
that money they have
tied up in their home. But right now we've got 22 million plus people out of work in the
past month so how does the unemployment
that's happening, how does that affect the
number of home sales? Well if we look
back here, at number one there on
the left, during the early 1990s we can
see that unemployment rose to about
seven and a half percent but yet the
number of home sales also increased It
seems a little counterintuitive doesn't
it that if people are out of work and
homes aren't selling but that's not the case.
Also, at number two, leading into the
crash, same thing, unemployment went up
but also so did the home sales. And then
of course we had the tremendous crash a
huge spike in unemployment rate and the
number of home sales leveled off fairly
well during that time. But then we had
this tremendous drop in the unemployment
rate to about where we are now and we
can see that there hasn't been a huge
corresponding increase in home sales,
it's actually been relatively flat. So
the point there is that there's not
really a direct relationship between the
unemployment rate and the number of
homes sold. So how are the buyers and the
sellers interpreting all that today? Well
63% of buyers are expecting prices to
decrease but yet 72% of home sellers
have not made a price adjustment,
have not reduce their home price yet.
So  it still remains to be seen how this
is all gonna play out but it's still a
very strong market, homes are still
selling every single day, homes are
coming on the market every single day, so
if you've been affected and not able to
buy a house right now,
hang in there, we're all gonna get
through this, this will be over soon. All
those houses that might not have
been able to sell will be out there,
other homes people that have been
holding off waiting to put their home on
the market those homes will be out there
for you so we're kind of expecting the
housing market to really take off once we all
back to work and the economy gets open
back up again. So if you'd like to talk
about any of this, send me a direct
message or give me a call, or send me a
text, send me an email, I'll love to
answer your questions and see what we can do to help.
Again, give this video a like, a comment,
a share so we can get this message out to as many people as we possibly can.
Thanks again for watching I hope you
continue to stay healthy, stay safe, and
until then I look forward to seeing you
on the next one!
