A recession is defined as 2 consecutive quarters of negative growth. In the first Quarter the economy is estimated to have grown by 2.1%, second quarter is estimated to have as low as -25.3% growth rate, and as the states economies start to open up, rehiring will pick up and the economy will go back to low growth rate estimated between 0.1% and 1%.
Which leads us to believe that we will not be experiencing a recession after all.
Will the housing market crash?
- Super low supply of homes; in 2019 we started the year with 3.4 months of inventory, this year, in Jan 2020 we had 2.3 months of inventory, and the numbers went even lower in March to 1.2 months. demand was 30% lower, month over month, but with such low supply of homes,worse case scenario, property values will stay flat.
- Banks are well capitalised and have programs to help homeowners refinance or restructure their loans so they don’t have to foreclose.
- The forbearance option allows homeowners to stop mortgage payments on government guaranteed loans for 6 months to a year and not be foreclosed on.
- Court systems are closed and will be busy with everything else except foreclosures and evictions.
- The consumer came to this crisis with the highest savings rate since recorded history, they will come back strong when we open up.
- The federal government has moved fast and injected 3 times more liquidity, in 2 weeks, than they did during the first 3 years of the 2008 recession.
- Companies have slowed their growth investments 2 years ago and are not as highly leveraged as they were back in 2008.
- Interest rates are set to stay low the next 3 to 4 years, which will drive demand.
- Historically, whenever an economy is over-stimulated like we are now with 10 trillion dollars of monetary and fiscal stimulus, it tends to inflate asset prices (Real Estate, Stocks and Commodities), same as it did the past 10 years just faster.
- As the rest of the countries inject capital in their economies, wealth moves from those countries to the US in the form of investments in Real Estate and Stocks, as our country is perceived safe and liquid.
- Cheap capital will be looking for a return, single family and multifamily real estate have always been the go to assets, especially now that commercial real estate has been hit the most during this crisis.
- Demand is still strong and will be coming back competing on even fewer properties, we never filled the shortage of homes we had the past 10 years.